ATOM sentiment is at rock bottom.
Original title: $ATOM's song
Original author: DAVID ATTERMANN
Original source: substack
Atom is currently not a popular token in the cryptocurrency market, but I think Atom is one of the best investments (risk/reward) on the market today.
This article will shed light on the coin’s historically depressed sentiment, the impressive growth of the broader Cosmos ecosystem , and why “this time is different.”
Cosmos and ATOM review
Cosmos is not a blockchain, but a network of sovereign blockchains (application chains or zones) connected by the IBC (Inter-Blockchain Communication) protocol. Instead of sharing block space with other applications (like most blockchains), developers can customize and deploy their own application chains on Cosmos, which gives them more design flexibility (different applications programs have different performance/feature requirements), better scalability/less competition for block space, and perhaps most importantly, applications can accumulate value through the native Gas token.
ATOM is the native token of CosmosHub , the first blockchain launched on Cosmos. Over the past few years, the Interchain Foundation has primarily focused on developing the Cosmos SDK, or software development kit, which enables developers to quickly and easily customize and launch application chains. This move is very strategic: first focus on application/developer recruitment to grow the network effect, and then add more features to the Hub and its native ATOM token.
However, since the project’s launch, there has been ongoing infighting within the community over the Hub’s role in the wider ecosystem and the token’s right to extract value. Despite exciting growth in the broader ecosystem, Hub’s ongoing identity crisis has hindered the token’s growth.
ATOM Investment Thesis Sentiment is at an all-time low
Sentiment on Hub is currently at an all-time low, which is evident from ATOM's absolute and relative price performance over the past few years:
Compared to ETH, the price of ATOM has declined over the past year and a half.
The market has surged recently, and ATOM has missed out on the recent broad market recovery.
And ATOM has fallen by 18% in the past 12 months (BTC has risen by 120% in the same period).
Cosmos has become the top Web3 ecosystem
The ecosystem currently ranks third in developer activity:
With approximately $50 billion in annual IBC trading volume:
The total ecosystem market value is US$82 billion, of which US$25 billion has been connected to IBC.
The ecosystem includes star projects in the main verticals of Web3, including blockchain infrastructure (Sei, Celestia, Dymension, Axelar, Neutron), DeFi (dYdX, Injective, Osmosis, Thorchain, Stride), DePIN (Akash, Pocket, Jackal , Syntropy, Cudos, dVPN), AI (Fetch.ai, Oraichain, Soarchain, AIOZ) and RWA (Provenance, Noble)
When Provenance is included, IBC’s total TVL is $12.8 billion, making it the second-largest ecosystem by TVL. (DefiLlama and other data providers do not aggregate Cosmos TVL as it is not yet connected via a universal token)
Why "This time is different"
Jae Kwon eventually quit.
ATOM holders have made many attempts in the past to increase the value accumulation of ATOM. The Hub community has historically been divided into two factions:
1) Those who want to keep the ATOM design simple to maximize security (led by co-founder Jae Kwon)
2) Those who wish to improve the value accumulation of their tokens, particularly by leveraging the economic activity of the broader Cosmos ecosystem
The chart below is a brief summary of Hub’s controversial history:
Discussing the future of Cosmos Hub and Stride
Despite successive rejections, the Hub’s outlook completely changed after the unexpected passage of Proposition 848 in November 2023, which would reduce ATOM inflation from 14% to 10%. While not a huge victory on the surface, it was the last straw for Jae Kwon, who immediately announced his intention to fork Hub along with his loyal followers. The new chain AtomOne is scheduled to be launched this month.
With Kwon finally exiting, the re-energized Hub community is determined to ultimately improve the value accumulation and perception of ATOM tokens. Although no major changes have been made yet, there are many exciting ideas (currency, security, liquidity) on the Hub forum and it is likely that there will be a wave of potentially game-changing proposals coming soon.
The IBC fee abstraction recently introduced by Osmosis is one example.
One of the most common complaints from Cosmos users is the need to have native tokens for different regions in order for them to interoperate. Osmosis, the leading Cosmos DEX, recently introduced a fee abstraction module that allows users to pay IBC Gas fees with any Cosmos token (as long as the receiving blockchain has approved the upgrade). The module is still in its early stages, but if it is widely adopted, ATOM has a legitimate chance of becoming IBC’s default gas token.
Bablylon integration greatly enhances the Hub's shared security model.
Another little-known development is Hub’s recent partnership with Babylon, a Bitcoin restaking protocol. The partnership, which will launch a testnet this month, will allow Bitcoin holders to stake their BTC to secure the Cosmos Hub ICS consumer chain, which will work with Babylon to bring Bitcoin security to the Cosmos Hub:
in conclusion:
Currently I am bullish on ATOM for three main reasons:
ATOM's mood is at rock bottom
The Cosmos ecosystem has never been stronger
With Jae Kwon gone, ATOM governance can finally pursue meaningful value accumulation
I don't have a specific catalyst or price target, I just believe the market is overlooking ATOM's bullish developments given its complexity and controversial past. This dynamic gives the token an extremely attractive ROI ratio today (for context, the FDV of ETH andSOL are currently 100x and 15x the FDV of ATOM, respectively). Given the favorable conditions, I believe Hub is just one governance proposal away from a re-rating in its market.
