ATOM Tests December Lows as Tokenomics Overhaul Sparks Volatility
Market Structure Shifts Lower
- ATOM has decreased significantly in price since the beginning of September.
- While the rate of decrease has been the most drastic for ATOM, it is also the only one for which the price is still within its starting range.
- However, the decrease doesn’t appear to be finished and ATOM is expected to eventually break down from the current trading range and reach new lows at the end of the correctional A wave.
Cosmos continued its December correction with a 10.1% weekly loss to settle at $2.46 as the market digested potentially revolutionary proposed tokenomics changes to the project, increasing technical uncertainty. ATOM now trades 24.4% lower than its monthly peak of $3.22 with sellers targeting newspaper lows and key moving averages in base money. Will $2.36 support the sixth tail in December be broken by fundamental uncertainty?
| Metric | Value |
|---|---|
| Asset | COSMOS (ATOM) |
| Current Price | $2.46 |
| Weekly Performance | -10.11% |
| Monthly Performance | -24.35% |
| RSI (Relative Strength Index) | 33.1 |
| ADX (Average Directional Index) | 26.1 |
| MACD (MACD Level) | -0.16 |
| CCI (Commodity Channel Index, 20-period) | -119.97 |
Momentum Exhaustion Signals Capitulation Phase – RSI Hits 30.5
The Relative Strength Index is at 30.54 on the daily chart, which is the first truly oversold reading since the August washout that preceded a 45% relief rally. This is interesting. Only five sessions collapsed momentum from neutral to oversold – this rate of decline usually implies capitulation rather than steady profit-taking. The tokenomics news exacerbated a normal pullback into a momentum flush.
The RSI is now back to levels last seen during the China FUD four years ago. Similar RSI configurations in September and November both produced sharp bounces within 48-72 hours, though neither managed to sustain rallies beyond reclaiming the 50 RSI level. That said, the 2018 weekly RSI effectively became a continuous resistance until the explosion in May, so we wouldn’t expect a sustainable rally until consolidation is achieved.
ADX at 26.1 Confirms Bears Control the Trend
When we consider trend strength, the ADX reads 26.11, having increased consistently from 19 the previous week as the selloff increased. Simply put, the move from choppy consolidation below 20 to trending conditions above 25 informs us that bears are in control and are not just booking easy gains. The acceleration through this important level occurred exactly as the tokenomics debate reached social media.
In simple terms, the ADX suggests that we have recently entered a phase in which fade trades are less likely to succeed, and momentum trades should be more successful. This means that day traders should adapt their strategies to focus on continuation setups rather than mean reversion plays. This should continue to be the case until the ADX drops back below 25 or the price rises above the 20-day EMA at $2.70.
Price Trapped Below Entire EMA Ribbon Since Tokenomics News
Looking at the EMA structure, the price action has been negative. ATOM is currently trading below all major EMAs, including the 10-day ($2.58), 20-day ($2.70), 50-day ($3.05), and most importantly, the 200-day EMA ($3.97). The 20-day EMA has acted as strong resistance, rejecting three relief rallies this week, each with higher volume as long traders lost hope.
Even more telling of the downside pressure is the distance of the name from its 200-day EMA, an extreme 46.3%. The deeper a security trades below this widely tracked average, the more unsustainable the selling trend becomes as price becomes increasingly disconnected from fair value.
While the 200-day EMA is also not explicitly a target to retest for the average security, it would need to be entered into the consideration set should any positive momentum emerge due to the extent of the recent breakdown.
$2.36 Support Becomes Critical Line After Six Successful Tests
There is formidable resistance between $2.58 (10-day EMA and prior support) up to the psychologically important $3.00 level, where the 50-day EMA resides. Above that, the monthly high at $3.22 is just 30% higher – a tough proposition as there is likely substantial overhead supply from trapped owners which, in combination with ongoing tokenomics apprehension, make it harder for the market to chew through these levels. Relief bounces have continually been met with strong shelling, which usually signals that institutional players are taking advantage of bounces to lighten up positions.
Bulls have been able to protect the $2.36 support over six individual tests this week, each rebound has become increasingly weaker. The concentration of buy orders in this area is probably also a result of a mix of technical range traders and committed longs protecting their positions from a breakout back down through their earlier entry zones. This level is also the 78.6% Fib retracement of the October – December rally.
The market structure looks like a classic descending triangle, as the horizontal support at $2.36 is set to collide with a strongly downward-slanting resistance line that is now at around $2.52. This type of pattern tends to break to the downside roughly 65% of the time and a bearish consensus is only reinforced by waning momentum readings and heightened fundamental ambiguity, reminiscent of the ongoing tokenomics disagreement. The positive institutional staking news out of Turkey with Everstake does act as a constructive offset, but it hasn’t been enough to turn the technical situation around.
Bears Target $1.70 if Support Fails – Bulls Need Tokenomics Clarity
If ATOM can reclaim and maintain a level above $2.58 through daily closing, it will remove the current short-term bearish sentiment and make way for a potential retest of the 20-day EMA around $2.70. However, for the bulls to make any meaningful progress and retest the $3.00 handle, a solid acceptance of the tokenomics proposal needs to occur with a volume surge exceeding 150% of the 10-day average volume.
If the $2.36 support fails to hold, further downside could break stop levels, triggering a decline to the $1.70 support level, which was the main support in the 2023 accumulation zone. It is another 30% of current value and will stop buyers who bought into the recent uptrend due to the false break in December. Lasts to say with each successful test, this will also become more likely. The ADX is rising, while the RSI in the oversold phase has room to grow.
Given the current momentum to the downside, and uncertainty regarding the supply-demand shock, we have to assume that the most likely path would be sideways grind between 0.000037- 0.000040 BTC, while the community discusses the recent governance proposals. Positive or negative, any news there could serve as a trigger for the next macro directional move, with the technicals leaning in favor of the sellers at the moment.
