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Presenting you with insights into what the crypto community is buzzing about each week!
Bitcoin broke above $41K, pushing its YTD return above 130% and dwarfing major traditional asset classes, including U.S. equities. In the meantime, U.S. equities have been resilient as inflation and job data continue to surprise to the downside.
Jobless benefit claims continue to climb to levels last seen in December 2021, suggesting the job market is starting to cool down, a sign of consumers’ weakening spending power.
The withering job benefit claims align with the lower PCE index, a gauge of inflation preferred by Fed officials. Elevated inflation is the main reason the Fed raises federal fund rates.
The token of the week is ATOM, the native token of the Cosmos Hub. Cosmos is an ecosystem that connects individual Layer 1s, which once stood out as strong opponents to Ethereum’s Layer 1 and Layer 2 ecosystems. As a highlight, dYdX is moving from an Ethereum Layer 2 to a Layer 1 within the Cosmos ecosystem for its V4 release.
However, ATOM has underperformed most of its peers in the 2022 bear market and 2023 crypto rebound, partly due to the ATOM 2.0 fiasco, in which the ATOM 2.0 proposal was revised and put on hold several times. The recent hard fork initiative by one of Cosmos's founders seems to clearly explain what has made the development of the Cosmos ecosystem stagnant for the past two years — the infighting within the development team.
Not only has the token price underperformed, but its TVL has also been losing out to competitors. The underperformance is evidenced by falling TVL from major ecosystem partners, including Cronos, Kava, THORChain, and Osmosis.
Regarding the token performance due to the split, ATOM might lose some value on the surface as the ecosystem is split into the old Cosmos Hub and the new AtomOne Hub. Existing ecosystem members can easily replicate the code and migrate to the new hub.
In actuality, the situation is more complex. In the short term, there may not be overwhelming selling pressure as ATOM holders might await the airdrop of ATOM1 — the native token of the new hard fork. Once the airdrop is completed, it might leave investors to decide which ecosystem they support.
The new ecosystem, AtomOne Hub, focuses on security and containing token inflation, while the old ecosystem (Cosmos Hub) may experiment and innovate, like the ATOM 2.0 proposal. It’s hard to say whether the new hard fork will always lose out, as historically, EthereumPoW has failed to replicate Ethereum’s success, but ETH has proven to beat Ethereum Classic.