The move itself is a great one for all parties involvement. Álvarez seems a good fit for Atlético; great pressing forward with good link-up play and a prolific goalscorer. After winning virtually all trophies in England, the player gets a move with an opportunity to solidify a starting spot in a title-challening team. As a bonus he gets to live in Madrid. At City, it became increasingly clear that he lacks the versatility to deputize for anyone but Haaland, with his touch being too heavy to play as a 10 and lacking the pace or dribbling proficiency to play as a winger. And a front two of Haaland and Álvarez would simply mean giving up too much control of the ball. Realistically, his minutes have also been inflated by De Bruyne missing half the season and he's most likely aware of that.
The fee seems high of course, but after the likes of Randal Kolo Muani, Darwin Núñez, Rasmus Højlund, Alexander Isak or Gonçalo Ramos it's more or less in line with the market for young strikers at the top end.