In general, Layer-2 blockchain protocols have grown tremendously in recent months. The tokens associated with the respective networks, in turn, have posted stellar performances in 2021. However, Ethereum-compatible Layer-1 chains like Cosmos, Tezos, and Polkadot have been stealing the show lately.
The alts mentioned above also had their HODLers with pretty solid returns over the last month. The value of Cosmos, to begin with, has appreciated by more than 92% in the last 30 days. In the same time period, Tezos and Polkadot increased 73% and 41% respectively.
So which alt is a better choice?
To answer the aforementioned question, it is crucial to analyze the status of a couple of metrics. Consider Stock-to-Flow to begin with. The reading of this relationship, at the time of writing this article, reflected values of 10.01 [DOT], 13.76 [XTZ] and 16.33 [ATOM] respectively. The S2F model quantifies the scarcity of a particular asset by taking into account parameters such as total supply and annual production.
A higher value means less supply entering the market and, in hindsight, means more scarcity. The same eventually helps the asset price go up one more inch. Considering the aforementioned readings, ATOM clearly led the race and was followed by XTZ and DOT respectively.
If risk-adjusted returns were taken into account, Cosmos once again led the pack and was followed by Tezos and then Polkadot. With that said, it should be noted that the Sharpe ratio of the alts represented values of 5.6, 4.6, and 3.9 at the time of writing.
Additionally, the 30-day average volatility of the three alt’s remained well below 2, making the environment for sustained growth quite favorable. A highly volatile market generally opens the door for dramatic price movement in either direction, but moderate levels generally encourage an uptrend rather than a downtrend.
Also, development activity on the respective networks has been quite impressive lately. The pace of work on GitHub was also, in general, well for these alts.
All three alternatives would add immense value to investors’ portfolios if they were to be sustained over the long term. However, when it comes to the short term, Cosmos seems to be a better option based on the state of the metrics.
Is there room for further appreciation?
Well, aside from a couple of immediate resistance levels around $ 30 and $ 31, Cosmos didn’t seem to have any other obstacles in its way. Volumes have been on the rise for this alt and it was also trading well above its moving averages. If buying pressure intensifies further, traders can expect this alt to break above its May highs in upcoming trading sessions. If you didn’t, the alternative would go back to around $ 27.
In fact, popular analyst Michael van de Poppe, in a recent video claimed the same thing and said,
“If I had to pick a coin that will follow Solana and it has to be a layer one solution, it would be Tezos, Polkadot or Cosmos, and given the structure, it looks amazing.”
Trading at $ 6.22 and $ 32.7 at press time, Tezos and Polkadot also didn’t seem too far off their May highs of $ 49.7 and $ 8.4.
This is a machine translation of our English version.