This Crypto Has Gained 525% in 2021. Should You Buy?
by Lyle Daly | Published on Sept. 27, 2021
Calling itself the "internet of blockchains," Cosmos could benefit the entire crypto market.
The value of Cosmos (ATOM) has been reaching new highs lately. While this crypto opened the year at a price of $6.49, it's now worth $40.64 at the time of this writing, good for a 525% increase. Much of that is due to a fantastic run in September. Cosmos doubled in value in less than two weeks, peaking at a high of $44.70.
With those price movements, Cosmos has outperformed the crypto market in 2021. To figure out if it's currently a good investment, let's look at what Cosmo does and its future potential.
What is Cosmos?
Cosmos is an ecosystem of decentralized apps (dApps) and services. It essentially aims to connect different blockchains so that they can all work together.
An issue with cryptocurrencies right now is that many of them have their own blockchain networks, but these blockchains operate independently. They can't communicate with each other, leaving the industry fragmented.
Cosmos has several open-source tools on its network to help make blockchains interoperable. These include:
- Cosmos Hub: The first blockchain on and the foundation of the Cosmos network. All the blockchains on Cosmos communicate through the Cosmos Hub.
- Inter-Blockchain Communication Protocol: A protocol that allows independent blockchains to exchange data. Blockchains that support this protocol are able to communicate with one another.
- Tendermint: A software that allows developers to more easily create their own blockchains, which are called zones, on Cosmos. These blockchains can then connect to other blockchains on the Cosmos Hub.
- Cosmos software development kit (SDK): A framework for building blockchains using Tendermint.
This isn't just a project with ambitious future plans. The technology that Cosmos offers is already in use. Two high-profile examples are the Binance Smart Chain and Terra, both of which are built on Cosmos SDK. There are currently 255 apps and services running on the Cosmos ecosystem.
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How the Cosmos cryptocurrency works
Cosmos is a proof-of-stake cryptocurrency. When you have its ATOM tokens, you can stake them, meaning you pledge them to help the network. Staked tokens are used to validate transactions, and in return, you earn rewards in the form of more ATOM.
There's no risk to your tokens, and you can unstake them if you want to trade them later. That's why staking crypto is a popular way for investors to grow their crypto holdings.
Some, but not all, transaction fees on Cosmos are paid in ATOM. There are blockchains built on Cosmos that use their own tokens for fees. Going back to a previous example, the Binance Smart Chain is built on Cosmos, but fees are paid in its own cryptocurrency, Binance Coin (BNB).
Where to invest in Cosmos
One of the nice things about Cosmos is that unlike many cryptos, it's widely available. Several of the major cryptocurrency apps and exchanges list Cosmos. Here are a few places you can buy it:
Should you buy Cosmos?
Cosmos is a project with a clear use case and growth potential. At the same time, it's not the only one with a focus on interoperability, and it's natural to wonder if a price dip is coming in the near future.
The biggest competitor to Cosmos is Polkadot (DOT), which is another cryptocurrency that helps blockchains communicate with each other. It has a market cap of nearly $29 billion right now, compared to nearly $9 billion for Cosmos. If Cosmos caught your eye, it's worth researching Polkadot as well to see how they compare.
Considering how much the price of Cosmos has increased recently, it may have already peaked for the time being. This isn't a big concern if you're focused on long-term investing and plan to hold your crypto for several years. Just keep in mind that you might not see immediate gains.
If you like what you've read about Cosmos, consider making it a small part of your portfolio. Like every cryptocurrency investment, there's ample risk involved, so you should only spend what you can afford to lose.
About the Author
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
Lyle Daly owns shares of Bitcoin.