Opinion: Why is ATOM highly bullish despite sentiment at historic lows?
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Opinion: Why is ATOM highly bullish despite sentiment at historic lows?
ATOM's sentiment is at its lowest point.
Navigating Web3 tides with focused insightsWritten by: DAVID ATTERMANN
Translated by: TechFlow
Currently, the Atom token is not popular in the cryptocurrency market, but I believe Atom represents one of the best risk/reward investment opportunities in today's market.
This article will explain the historically bearish sentiment around the token, the impressive growth of the broader Cosmos ecosystem, and why "this time is different."
Cosmos and ATOM Recap
Cosmos is not a single blockchain, but a network of sovereign blockchains (app-chains or zones) connected via the Inter-Blockchain Communication (IBC) protocol. Instead of sharing blockspace with other applications—as is the case on most blockchains—developers can customize and deploy their own application-specific chains on Cosmos, giving them greater design flexibility (different apps have different performance/functionality needs), better scalability/fewer blockspace congestion issues, and perhaps most importantly, enabling apps to capture value through native gas tokens.
ATOM is the native token of the Cosmos Hub, the first blockchain launched on Cosmos. Over the past few years, the Interchain Foundation has primarily focused on developing the Cosmos SDK—the software development kit—which enables developers to quickly and easily customize and launch app-chains. This strategy was highly strategic: prioritize application and developer adoption to grow network effects first, then enhance the Hub and its native ATOM token with additional utility later.
However, since the project’s inception, there has been ongoing internal conflict within the community regarding the role of the Hub in the broader ecosystem and the rights of the ATOM token to capture value. Despite exciting growth across the wider ecosystem, the Hub’s persistent identity crisis has hindered the token’s progress.
The Investment Case for ATOM
Sentiment at an All-Time Low
Current sentiment toward the Hub is at an all-time low, evident from ATOM’s poor absolute and relative price performance over the past few years:
Compared to ETH, ATOM’s price has declined over the past year and a half.
During the recent broad market rally, ATOM missed out on the recovery.
ATOM has declined 18% over the past 12 months (while BTC rose 120% during the same period).
Cosmos Has Become a Top Web3 Ecosystem
The ecosystem currently ranks third in developer activity:
With approximately $50 billion in annual IBC transaction volume:
Total ecosystem market cap stands at $82 billion, with $25 billion already connected via IBC.
The ecosystem includes standout projects across major Web3 verticals: 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).
Including Provenance, the total IBC TVL reaches $12.8 billion, making it the second-largest ecosystem by TVL. (DefiLlama and other data providers do not aggregate Cosmos TVL because it is not yet unified under a common token.)
Why “This Time Is Different”
Jae Kwon has finally exited.
ATOM holders have repeatedly attempted in the past to increase ATOM’s value accrual. The Hub community has historically been divided into two camps:
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1) Those who want to keep ATOM’s design simple to maximize security (led by co-founder Jae Kwon)
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2) Those who want to improve token value accrual, especially by tapping into the economic activity of the broader Cosmos ecosystem
The diagram below summarizes the contentious history of the Hub:
Discussion on the future of Cosmos Hub and Stride
Despite repeated rejections, the landscape changed completely after Proposal 848 passed unexpectedly in November 2023, reducing ATOM inflation from 14% to 10%. While seemingly a minor victory, this was the final straw for Jae Kwon, who immediately announced his intention to fork the Hub along with his loyal followers. The new chain, AtomOne, is scheduled to launch this month.
With Kwon’s departure, the reinvigorated Hub community is now determined to finally improve ATOM’s value accrual and perception. While no major changes have been implemented yet, there are many exciting ideas being discussed on the Hub forum (around monetary policy, security, liquidity), and a wave of potentially game-changing governance proposals may soon emerge.
A recent example is the IBC fee abstraction introduced by Osmosis.
One of the most common complaints among Cosmos users is the need to hold native tokens of different zones to enable interoperability. Osmosis, the leading Cosmos DEX, recently introduced a fee abstraction module that allows users to pay IBC gas fees using any Cosmos token (provided the receiving chain has approved the upgrade). The module is still in early stages, but if widely adopted, ATOM has a legitimate chance to become the default IBC gas token.
Babylon integration significantly strengthens the Hub’s shared security model.
Another lesser-known development is the Hub’s recent partnership with Babylon, a Bitcoin restaking protocol. The collaboration, set to launch its testnet this month, will allow Bitcoin holders to stake their BTC to secure Cosmos Hub ICS consumer chains, effectively bringing Bitcoin-level security to the Cosmos Hub through Babylon:
In summary:
I am bullish on ATOM today for three main reasons:
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ATOM sentiment is at rock bottom
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The Cosmos ecosystem has never been stronger
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With Jae Kwon’s exit, ATOM governance can finally pursue meaningful value accrual
I don’t have a specific catalyst or price target—I simply believe that due to its complexity and controversial past, the market has overlooked the bullish developments around ATOM. This dynamic gives the token an exceptionally attractive risk/reward profile today (for context, ETH and SOL currently have FDVs that are 100x and 15x that of ATOM, respectively). Given these favorable conditions, I believe the Hub is only one governance proposal away from a market repricing.
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