Is ATOM about to explode?
The era of Cosmos eco-system DeFi is unfolding. So far, the Osmosis project is first cab of the rank, and within its first three weeks of operations, has captured over $100 million in TVL, based only on the 9 Tokens that currently run on chains that have enabled IBC, which includes its own native tokens OSMO and the mysterious ION.
Source: Cosmos Twitter account
Gravity Dex is coming, which will change the game for ATOM and the Cosmos eco-system. This will be a more standardized AMM protocol than the flexible Osmosis, and it is likely that ATOM will be the base token for most (if not all) pools. The demand for ATOM will be quite significant, and there are already signs it is being accumulated with the intention of being utilized in Gravity Dex.
Map of Zone's
A look at the fascinating "Map of Zone's" website tells part of the story. This site shows the IBC connections, and all the activity that is occurring across the channels being used by IBC connected chains. The majority of IBC transfers at the moment are to and from Osmosis, with the Cosmos hub (ATOM) being the number 2 zone for activity.
Source: Map of Zones 30 days
Over the last 30 days, this chart from Map of Zones shows just over 40,000 IBC transfers out from Cosmos - presumably mostly to Osmosis. Transfers in for the month (mainly from Osmosis to Cosmos) stand at nearly 56,000. So you could say there is a roughly 60/40 split in favor of TX's to Cosmos. Like I said the vast majority of this activity currently would be to and from Osmosis.
Source: Map of Zones 30 days
The picture over the last seven days is a clear indication that there is a significant number of people farming Osmosis to increase their ATOM stash. The last seven days of IBC transfers shows just over 10,000 IBC TX's from Cosmos to Osmosis, and over 22,000 the other direction. That split is more like 70/30, and would suggest that OSMO is being traded to ATOM and withdrawn from Osmosis back to its native chain.
Source: Map of Zones 7 days
The important thing to note is that these tables only show the number of transactions, not the size or amount contained in the transfers. But it is clear that the number of TX's has trended to a flow favoring heavily moves from OSMO to ATOM. It also could indicate that people are trading their other IBC tokens (like AKT, XPRT, DVPN and so on) for ATOM, via Osmosis. But I think the more likely conclusion is that people have added to their Osmosis LP's and staking, and many are now farming the OSMO rewards to add more ATOM to their stash.
This trend also shows up in the most obvious place, price charts. The 7 day chart for ATOM looks like this:
Source: Coingecko
While the 7 day chart for Osmosis look as follows:
Source: Coingecko
I think these charts paint a fairly clear picture that ATOM is currently being accumulated, in the run up to Gravity Dex.
There are also a couple of other factors that could impact ATOM, adding more use cases and utility for the token.
Liquid staking.
Traditionally, staking ATOM's has meant locking them up with a 21 day unlock period. However, work is being done in a number of area's that could change these dynamics and add some composable DeFi yield opportunities to Staked ATOM's. The Persistence protocol (XPRT) is approaching the launch of it's "liquid staking" solution, with ATOM as the first token it will go live with. This project probably deserves a post of its own, and is one I am following closely, but to make a long story short, you stake your ATOM's with the Persistence project, they then issue you with an ERC20 representation of that staked ATOM (pATOM or something like that). Then you can use that ERC in Ethereum DeFi. You will still earn the income from the staked base asset, plus you can also earn rewards from DeFi utility on Ethereum. Composable staking is a new frontier opening up, and ATOM will be one of the first tokens in this space. For more information about the Pstake platform, this Medium blog post is a great starting point.
Shared security.
Another interesting development coming down the track for Cosmos is the concept of "shared security". As I understand it, from limited research, this will mean that other IBC enabled chains will be able to "rent" security from the Cosmos chain. As an example, Osmosis currently has 100 million in TVL, but only around $40 million in OSMO value staked to the chain. This could potentially lead to a security risk, if the unlikely event of Validator collusion to steal funds were to occur. There is a small risk, but it non-the-less deserves consideration. Shared security would mean that Osmosis, could "rent" some of ATOM's security (with $billions in value staked) and ATOM validators (and thus stakers) would earn from assisting Osmosis to secure those funds.
IBC is about a lot more than just token transfers, and shared security is one aspect that could potentially become a significant income stream for ATOM stakers and validators. This is on the roadmap to be rolled out later in the year, and could add significant appeal to the ATOM token down the track.
Conclusion.
Anecdotally, it appears that the ATOM token is being noticeably accumulated at the moment. It seems many are farming Osmosis, and converting their gains into ATOM. The ATOM token will become the backbone of 3 Different DeFi protocols (Osmosis, Gravity Dex and Sifchain) within the next couple of weeks. Further on the horizon are some new developments like shared security and liquid staking that could further drive the demand for ATOM. We all saw the significant run up for ETH and BNB as DeFi platforms exploded on those eco-systems, with those tokens being the base asset. ATOM is about to become the base asset for a new DeFi explosion, and its circulating supply is currently 70% staked. Also, throughout this whole analysis, I have not once mentioned that at some point later this year, Thorchain will add the IBC upgrade and then ATOM will be able to be paired with RUNE on Thorchain - another significant driver for demand for ATOM.
Bullish ATOM.
None of this post is financial advice. Do your own research.
Thanks for reading,
JK.
Posted Using LeoFinance Beta
