Founder of DeFiance Capital: Why I am bullish on Osmosis?
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Founder of DeFiance Capital: Why I am bullish on Osmosis?
Osmosis is one of the most exciting opportunities in Cosmos.
Navigating Web3 tides with focused insightsAuthor: Arthur, Founder & CEO of DeFiance Capital
Translation: 0xjs, Jinse Finance
Since returning from Cosmosverse in Istanbul, I’ve been bullish on the Cosmos ecosystem and have been seriously thinking about the best way to gain exposure.
After deep research, we believe Osmosis stands out as one of the most exciting opportunities in Cosmos.
Here’s why (section titles added by translator):
In One Sentence
Osmosis is a DEX-centric application chain within Cosmos and serves as the de facto liquidity hub across the Cosmos ecosystem via the Inter-Blockchain Communication (IBC) protocol.
Latest Developments in Cosmos Projects
Circle
Recently, Circle launched native USDC on Noble within Cosmos. Having a native version of major stablecoins is essential for any serious blockchain network, and this is a huge win for Cosmos liquidity through IBC. Out of the $15 million in native USDC issued on Cosmos, $10 million is currently on Osmosis.
dYdX Chain
dYdX Chain launched last week and will soon enable trading, making the Cosmos ecosystem home to the largest derivatives DEX with over $23 billion in monthly trading volume.
Other Top Projects (Celestia, Berachain, XDEFI, Akash, etc.)
We are also seeing other top-tier projects launching or preparing to launch, such as Celestia and Berachain. Lido Finance has also introduced wstETH.
Cosmos-focused wallets like XDEFI have recently seen significant growth in weekly active users.
Akash, the first decentralized cloud network offering enterprise-grade NVIDIA H100/A100 GPU chips, is also a Cosmos app chain.
Osmosis Is the De Facto Liquidity Hub of Cosmos
As more projects, tokens, and users join the ecosystem, trading volumes of Cosmos app chain tokens will increase, providing substantial tailwinds for OSMO.
The Osmosis app chain is currently the largest on-chain liquidity center for Cosmos-based assets, with a TVL of $122 million, solidifying its role as the de facto liquidity hub in Cosmos.
Approximately 70% of activity on Osmosis occurs in LP pairs involving OSMO, which has several implications: 1) increased utility for OSMO, and 2) a multiplier effect on trading volume due to users typically needing to route through OSMO pools to acquire desired assets.
This multiplier effect should shine brightest when liquidity returns alongside a bull market. While Osmosis currently sees around $20 million in daily trading volume, it still pales in comparison to bull market levels exceeding $200 million per day.
Improved OSMO Token Economics
The community has recently voted in favor of several proposals that significantly improve OSMO’s tokenomics. In Q2 2023, annual token emissions were cut by 50%, bringing them down to around 10%. Starting in 2025, this emission rate will decrease by one-third each year.
Just weeks ago, Osmosis began charging a 0.1% taker fee on all swaps. At current levels, this generates over $4 million in revenue annually, most of which flows to OSMO stakers.
This new revenue stream is expected to be roughly ten times larger than current figures, which primarily consist of transaction fees and MEV revenue capture within the Osmosis protocol.
Interestingly, the portion of taker fees collected in non-OSMO assets will be periodically swapped into OSMO. At current levels, we estimate this creates over $600,000 in annual OSMO buy pressure.
Osmosis also features superfluid staking, allowing users who provide liquidity in certain pools to simultaneously stake their positions to help secure the network, while also capturing MEV and concentrating liquidity—effectively stacking staking rewards and LP fees.
Osmosis Is Severely Undervalued and Poised to Capture Value from the Cosmos Ecosystem
Therefore, we believe Osmosis is well-positioned to capture value from the growing Cosmos ecosystem. Since the launch of TIA, daily trading volume has already increased by 50–100%. We expect further catalysts from the upcoming launches of tokens like DYDX, as well as the growth of Noble’s USDC and WBTC.
While Solana has been one of the standout performers this year, many overlook the fact that some Cosmos app chain tokens—such as INJ and RUNE—have actually outperformed SOL year-to-date.
OSMO remains severely undervalued relative to peers. Thorchain, with a similar TVL, trades at a $1.5 billion FDV, whereas Osmosis has a market cap of just $300 million and an FDV of $600 million—far below the valuation from its Series B round led by Paradigm (priced at $1.60 per token, fully diluted).
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@Arthur_0x
