Invest 1 ETH to purchase Cosmos and stake (Capital Gains + Passive Income Play)

Thesis: Largely driven by tighter financial conditions, inflation and other Covid-19 risks, we’re seeing a notable drop in prices for cryptocurrency assets across the board. Amid the volatility in prices, returns on staking tokens in a non-custodial manner remains a relatively secure way to drive returns for WSC members through passive income by staking ERC-20 tokens for 6 months/1 year. Given the lower prices we’re seeing, we have the unique opportunity to combine this passive income stream with capital gains on the token as well given the reasonable likelihood of price recovery over a 6 month or 1 year time frame.

WHICH TOKEN: Cosmos (ATOM) TIME FRAME: 6 Months/ 1 Year. ENTRY PRICE: TBD ENTRY DATE: TBD Hypothesized Return (3 scenarios): Inputs:

• ETH Price (at time of writing): $2500
• ATOM Price (at time of writing): $31.66
• Staking rewards are compounded continuously
• 1 Year timeframe
• Cosmos staking APR: 13.24% (stakingrewards.com)

Amount of ATOM at Day 0: 78.96 ($2500/$31.66)

1. Base Case (no price appreciation): 78.96 x e^(13.24% x 1) = 90.13 ATOM. Total Return = 14.16%

2. Conservative Bull Case (10.0% Price appreciation) 90.13 ATOM x 31.66 x 1.1 = 25.55% Return

3. Bear Case (-20% Price decline) 90.13 ATOM x 31.66 x .80 = -8.7% Return

Risk Considerations: In all scenarios, the Cosmos price staking return stays constant so depending on how we see price movement, we could choose to extend the term of the investment so as to maximize our return.

RISK LEVEL: Low

Risk Factors: Cosmos price volatility

The Cosmos price volatility goes hand-in-hand with the Ether price volatility. Given the higher institutional involvement in Ether, ATOM will likely have greater price volatility than Ether but lets see how in-tune ATOM is to ETH by figuring out ATOM’s beta coefficient relative to Ethereum.

I took two years of daily closing data from Coinmarketcap on ATOM and ETH. (1 January 2019 – 31 December 2021) i.e 1462 data points. Over the two year period, ATOM had a beta coefficient of 0.85

What does this mean? A beta of 1 indicates would indicate that ATOM would move in line with ETH. But a beta of 0.85 for Cosmos indicates that ATOM over last 2 years has exhibited less volatility than ETH which bodes well for us moving forward. It goes without saying that I’ve used a relatively short period of time for the beta calculation so my result may be skewed.

End Statement: Given the return range and stability through passive income with potential of additional upside, I believe the 15-25% return is attractive as a lower risk investment to balance out the higher risk investments that will surely be voted through.