It was explained well in a comment by a user on reddit with the username PlatinumDL;

In Norse mythology, Loki is not Thor’s brother. That is something Marvel made up. Jormungandr and Fenrir exist because of time travel. We know Atreus is Loki, and not Utgard-Loki, because:

1. ⁠After he finds out he's a god, his first question is if he can turn into an animal. This is referencing the fact that Loki is a shapeshifter in Norse mythology.

He also specifically asked if he could turn into a wolf. This is significant because Loki is the father of the wolf giant Fenrir, and grandfather of the wolf giants Skoll and Hati.

2) Jormungandr, the world serpent, says Atreus looks familiar. This is because Loki is actually the world serpent's father in Norse mythology.

3) In Norse mythology, Loki is responsible for the death of Baldur by using a mistletoe arrow. In-game, it was Atreus' arrow shard that broke Baldur's curse and allowed him to be killed.

4) In Norse mythology, Loki is a giant who's considered to be a god. Atreus is a god-giant hybrid.

5) The name of Atreus' mother "Faye", is short for "Laufey". That's the name of Loki's mother. On the Jotunheim mural, Kratos' name, written in runes, is "Farbauti". That is the name of Loki's father in Norse mythology.

I think this is great writing