Currently, ATOM is 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 token’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 Cosmos Hub, 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 allows 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 the Hub is currently at an all-time low, which is evident from the absolute and relative price performance of ATOM 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 an annual IBC transaction volume of approximately $50 billion: the total ecosystem market value is $82 billion, of which $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 the 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:
A Brief Summary of the Hub’s Controversial History: Discussing the Future of the Cosmos Hub and Stride Despite successive rejections, the Hub’s prospects completely changed after the unexpected passage of Proposition 848 (reducing ATOM inflation from 14% to 10%) in November 2023 . 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 on the Hub forum (currency, security, liquidity) 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.
Babylon integration greatly enhances Hub’s shared security model
Another little-known development is Hub’s recent partnership with Babylon, a Bitcoin staking 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:
Summary: Currently I am bullish on ATOM for three main reasons:
Market sentiment is down: ATOM’s price has underperformed, but that also means it has the potential to rebound.
Growth of the Cosmos ecosystem: Cosmos has a solid position in the Web3 ecosystem, providing strong support for ATOM.
Upcoming changes: The reactivation of the Hub community and new proposals may change the value accumulation and perception of ATOM.
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.