Is Cosmos Facing an Ecological Crisis? Talent Drain and Excessive Decentralization

(This article is reprinted from TechFlow Deep Tide, original article title )

Cosmos Ecosystem is at a Critical Historical Moment

The performance of the Cosmos ecosystem is attracting heightened attention from the end of 2024 to early 2025, but not for good reasons. As of August 5, 2025, the core token ATOM of Cosmos has shrunk to $4.2, a staggering decline of 90% from its peak. Meanwhile, compared to the end of 2024, the major project Osmosis (OSMO) has dropped 79%, and the price of JUNO has shrunk 82% to almost zero. Even the relatively strong Injective (INJ) has retreated from $34 to around $12, not to mention the widespread declines in Kava, Evmos, Cronos, and Fetch.AI…

Once experiencing counter-cyclical growth in 2022 and ranking second in Total Value Locked (TVL), Cosmos now faces a collective value destruction. What exactly has happened to the Cosmos ecosystem, once regarded as the core of blockchain networks? From being a star project during the DeFi boom in 2021 to the current lackluster market performance, what are the underlying reasons for this transformation? Upon careful analysis of its recent performance, we find that the significant drop has deeper contextual backgrounds—not merely market volatility.

Airdrop Frenzy, Death Spiral

At the beginning of 2024, when the airdrop news of Celestia (TIA) spread throughout the crypto community, no one could have anticipated that this free wealth feast would mark the beginning of a nightmare for the entire Cosmos ecosystem. As a modular data availability network built on the Cosmos SDK, Celestia is deeply integrated with the Cosmos ecosystem through the Inter-Blockchain Communication (IBC) protocol. A year ago, in the spring, the price of TIA soared to a peak of $20.17, with social media filled with tales of overnight wealth. However, this frenzy lasted only two months before a wave of sell-offs surged, causing the price of TIA to plummet 91.9%, currently hovering around $1.6.

Coincidentally, the crash occurred across the entire Cosmos ecosystem. The Celestia airdrop event perfectly illustrates the entire process of the “hype—sell-off” vicious cycle within the Cosmos ecosystem. When the airdrop news was released, a large amount of speculative capital rushed in, driving prices up quickly and creating an illusion of prosperity. However, such growth based on expectations rather than actual value is destined to be unsustainable. As early holders began to sell off to lock in profits, prices started to decline, panic spread rapidly, leading to larger-scale sell-offs, ultimately resulting in a crash.

Osmosis experienced a similar process during the liquidity mining frenzy in 2022, with prices falling from a peak of $11 to the current $0.17. Each cycle consumes the ecosystem’s trust and capital base, and such short-term speculative behavior expels genuine long-term builders, plunging the whole ecosystem into a restless atmosphere.

Puppet Emperor and Divided Kingdoms

The inability of ecosystem projects to escape the death spiral has also posed a bottleneck for the price performance of ATOM, the core asset of the Cosmos ecosystem. Under the multi-chain parallel architecture, ATOM’s positioning as network fuel has not formed an effective closed loop. Many sub-chains have independent native tokens that do not directly rely on ATOM, leading to difficulties in the return of ecosystem traffic and value. The high inflation model without a total supply cap, while incentivizing staking and governance participation, has also created long-term price dilution pressure. More critically, although Cosmos’s free chain-building philosophy encourages innovation and competition, it has led to traffic dispersion, with projects acting independently, contrasting sharply with Ethereum’s model of locking most value in ETH.

ATOM has become the puppet emperor of Cosmos; governance issues further proliferate, and the federation has not benefited. The JUNO project is the most typical case: in April 2022, the JUNO community discovered a whale user evaded airdrop restrictions through multiple wallets, acquiring JUNO tokens worth approximately $35 million. After intense community debate, JUNO DAO officially voted on April 29, 2022, to pass Proposal No. 20, deciding to confiscate these tokens, which took effect on May 4. This controversial decision severely divided the community and significantly decreased investor confidence in JUNO’s governance mechanism. The governance mechanism’s failure not only failed to address the technical and market challenges facing the project but accelerated its decline, with JUNO’s price plummeting from $43 to $0.09, a staggering decline of 99%.

However, these are not the only problems facing Cosmos, nor are they unique crises.

The “Midlife Crisis” of Multi-Chain Ecosystems

When we discuss the difficulties faced by Cosmos, we are actually analyzing the collective anxiety confronting the entire multi-chain ecosystem— the profound disconnection between technological innovation and market adoption. In April 2025, Cosmos ranked first in blockchain project development events. While seemingly leading, this does not mask the gradual reduction in active crypto developers.

Source: developer report

Other multi-chain ecosystems are similarly stagnant: Ethereum’s developer count declined by 2.54%, BNB Chain’s development metrics dropped by 9.45%, and Polygon, Arbitrum, Optimism, and Avalanche fell by 10.35%, 7.62%, 6.82%, and 12.08%, respectively. Polkadot ranks tenth with 3.4K developer activity, with contributors decreasing by 0.91% to 325, facing a slow response to the JAM upgrade and market competition, prompting the community to issue an urgent call of “React or die.”

All multi-chain ecosystems face similar structural challenges:

– Lack of network effects: Compared to Ethereum, there is a lack of sufficient user base and application scenarios to form a self-reinforcing ecosystem cycle.
– Insufficient developer incentives: Despite advanced technology, there are not enough economic incentives to attract and retain outstanding developers.
– Ambiguous market positioning: In competition with Ethereum, these projects often fall into a dilemma of technological superiority but application scarcity.

This inherent dilemma has been further amplified in the current unique market environment. In the second quarter of 2025, the total market capitalization of the crypto market surpassed $3.5 trillion, but the leaders in this growth phase are institutional funds, which operate under entirely different investment logics: controllable risk, ample liquidity, and regulatory compliance. For institutional investors pursuing steady returns, Bitcoin and Ethereum are clearly more attractive than technically innovative multi-chain projects. This change in capital flow directly leads to further marginalization of multi-chain projects in financing and liquidity.

Moreover, the institutionalization process has brought about another unexpected consequence—the “Matthew Effect” of infrastructure construction is accelerating. Stablecoins are becoming the core infrastructure connecting traditional finance and the crypto world. However, this infrastructure development primarily revolves around mature networks. As stablecoins become the utilities of the new financial system, multi-chain ecosystems find themselves standing on the edge.

This predicament forces these ecosystems to re-examine their value propositions, shifting from pure technological competition to a more pragmatic route that emphasizes user experience and actual application scenarios. This transformation is not only a necessity for survival but could also become the starting point for the next round of innovation cycles.

At a Crossroads: Rebirth or Decline

At the time point of 2025, the Cosmos ecosystem is at a critical historical moment. From the grand vision of blockchain networks when the mainnet launched in 2019, to the market’s fervent pursuit of interoperability when ATOM reached a historical peak of $44.70 in 2021, and now deep reflections as prices drop to around $3.5 during the bear market from 2022-2024, Cosmos has traversed a typical yet unique growth trajectory of blockchain projects.

In this darkest hour, although the data is bleak, Cosmos is indeed undergoing a profound self-revolution.

Different institutions’ forecasts for the Cosmos (ATOM) ecosystem and price trends show diverse expectations. Short-term predictions vary widely, with CCN and Changelly being more pessimistic, emphasizing bear market pressures indicated by technical indicators (such as RSI, moving averages), while more optimistic entities like CoinLore and CryptoNewsZ expect a bull market to push prices above $20-$40.

Regarding the uncertain future of Cosmos, ecosystem expansion, technological upgrades, market sentiment, regulatory environment, and competitive pressure are frequently mentioned considerations. It is undeniable that the actual effects of technological upgrades and governance reforms require time for verification. Competition pressures from Layer-2 and other interoperability solutions persist, and the impact of Federal Reserve policies and geopolitical risks on the overall crypto market cannot be overlooked. More importantly, this shift from idealism to realism is a painful process in itself, requiring a delicate balance between technological innovation and the market.

History tells us that truly great technologies and ecosystems often emerge in the darkest moments. Cosmos also needs time to validate whether what lies ahead is a future or a deeper night.

Risk Warning

Cryptocurrency investments carry a high level of risk, and their prices can be highly volatile, potentially leading to a total loss of principal. Please carefully assess the risks.