ATOM, the native token of the Cosmos blockchain, has ralled strongly in the past week for several fundamental reasons.
ATOM, the native cryptocurrency of the Cosmos blockchain protocol, has rallied by over 100% in the past week.
Analysts are attributing the rally of ATOM to two major fundamental factors. First, in recent weeks, layer one blockchain protocols, like Avalanche (AVAX) and Polkadot (DOT) have gone through a major rerating.
Second,
the utility of ATOM that enables holders of the cryptocurrency to earn
through swap, gas, and transaction fees could make it more compelling
for investors.
The rerating of layer-one blockchains
The
term rerating is used in the cryptocurrency market to describe when the
value of a cryptocurrency rises rapidly after stagnating for a
prolonged period.
Typically, rerating occurs when the market finds
that a cryptocurrency is undervalued due to fundamental reasons or a
certain catalyst buoys the potential of the blockchain protocol.
Cosmos is primed for a rerating because other layer-one blockchain protocols, like Polkadot, have seen massive rallies throughout January and February.
Currently,
as of Feb. 13, the valuation of Cosmos hovers at around $5 billion. In
comparison, Polkadot’s valuation is at around $27 billion, more than
five times higher.
More importantly, compared to other layer one
blockchain protocols, Cosmos has major decentralized platforms and
blockchain projects launched on top of it.
Projects on top of Cosmos valued higher than ATOM
Most
notably, Terra and Binance Smart Chain are both based on the Cosmos
blockchain. The valuation of the two blockchain projects alone are above
$22 billion.
Technically, BNB is the native token of both Binance
Smart Chain and the Binance ecosystem, but nonetheless, the valuation
of the two projects alone surpass that of Cosmos.
A pseudonymous DeFi investor known as “SpiderCrypto” said ATOM is undervalued compared to other blockchains. The investor said:
“Also
@cosmos $ATOM is undervalued relative to other blockchains. So many
great projects using tendermint / cosmos and you don't even know anon.
$10b marketcap and will explode like $avax.”
A
pseudonymous Cosmos validator Immasssi also emphasized that the
tokenomics of ATOM, which allows users to benefit from the fees
generated from the Cosmos ecosystem, makes ATOM more attractive.
Similar
to DeFi projects that have cash flow and a token that lets users earn
through staking, the validator said ATOM holders will earn transaction
fees from packets routed through the Cosmos hub. He said:
“$ATOM
holders will earn tx fees for packets that are routed through the hub.
This includes all #data. Additionally atom holders will earn swap fees,
gas fees & tx fees from the upcoming AMM. Furthermore earning from
shared security. Once you realize what that means for ATOM.”
Additionally,
the long-term sentiment score for ATOM has risen significantly this
year alongside Terra LUNA's, suggesting that the rerating of Cosmos may
continue, particularly if the DeFi sector continues to grow.
souce link: https://cointelegraph.com/news/atom-rallies-100-in-a-week-what-s-behind-the-rerating-of-cosmos
