TL;DR Breakdown
- The September 2023 metaverse market is far off from its peak success in November 2021, and the numbers show painful results.
- The Sandbox (SAND), Axie Infinity (AXS), Enjin Coin (ENJ), and Decentraland (MANA) arguably dominated the Metaverse and GameFi – not anymore.
Description
In recent developments, the booming Metaverse market is exhibiting signs of cooling off as it experiences a notable price dip across various digital assets and virtual real estate properties. Once hailed as the ‘Next Frontier’ in technological evolution and a lucrative investment opportunity, the Metaverse is currently navigating through turbulent waters, sparking debates among investors, … Read more
In recent developments, the booming Metaverse market is exhibiting signs of cooling off as it experiences a notable price dip across various digital assets and virtual real estate properties. Once hailed as the ‘Next Frontier’ in technological evolution and a lucrative investment opportunity, the Metaverse is currently navigating through turbulent waters, sparking debates among investors, developers, and analysts about the sustainability and long-term prospects of these digital universes.
This downturn has led many to question whether the recent slump is a market correction, a momentary hiccup, or a harbinger of more dramatic shifts to come. Regardless of the cause, one thing is certain: stakeholders are paying close attention to every move and recalibrating strategies as the Metaverse faces its first major financial test.
Metaverse users register massive losses
In November 2021, at the height of the crypto market boom, the combined market capitalization of the “big four” metaverse ventures peaked at $16 billion. On-chain analysis investigates the critical factors that have resulted in losses for 98% of metaverse token holders in 2023.
At the market’s peak in November 2021, Metaverse, GameFi, and Play-to-Earn dominated the crypto space. Less than two years later, the majority of investors who bought into the Metaverse fad are currently calculating their losses.
The Sandbox (SAND), Axie Infinity (AXS), Enjin Coin (ENJ), and Decentraland (MANA) arguably dominated the Metaverse and GameFi sector during the 2021 crypto market rally.
Notably, the total market capitalization of the four tokens in November 2021 peaked at $16 billion. At the time, these Metaverse tokens represented 0.5% of the global crypto market capitalization of $3 trillion.
However, as the crypto winter began, Metaverse initiatives received widespread criticism, ranging from security to privacy, community governance, and a lack of long-term HODLing incentives.
The Metaverse Big 4 prices see trading pain
Note that as of September 2023, the total value of SAND, AXS, ENJ, and MANA has decreased to $1.23 billion. This is a startling 92% decline from November 2021’s market cap of $16 billion.
To put this decline in context, the market dominance of these four Metaverse tokens has fallen to 0.12% of the global crypto market capitalization.
The market capitalization is a financial metric representing a cryptocurrency’s total circulating supply value. It estimates a blockchain‘s total value at a particular time period.
By aggregating the market capitalizations of the four largest metaverse projects, investors can gain a clear understanding of the sector’s systemic significance within the broader crypto market.
This demonstrates that crypto investors’ disinterest in the metaverse sector has increased over the past two years. And now they are allocating capital to other, more resilient industries and emergent trends.
How are the investors surviving the market?
Those who believed the 2021 metaverse hysteria are already calculating their losses, despite the fact that the game may not be over.
Historical In/Out of the Money (IOMAP) data from IntoTheBlock estimates the deficit or profitability of all wallet addresses holding a specific token. It is calculated by comparing current prices to the average cost of acquiring tokens.
The below historical IOMAP data demonstrates that the vast majority of current ENJ, MANA, AXS, and SAND holders are in the red.
Axie Infinity and The Sandbox holders are doing the worst out of the four major metaverse initiatives.
Axie Infinity is an NFT-based online video game created by the Vietnamese studio Sky Mavis, that was once renowned for its bustling in-game economy. According to historical data from IntotheBlock, 99.54 percent of all addresses that purchased AXS are currently “out of the money.”
The Sandbox project is a virtual world where users can create, own, and monetize gaming experiences. 98.34% of those who purchased SAND tokens are also currently submerged.
Meanwhile, investors in Decentraland and Enjin Coin are also far from profitable.
Decentraland’s vibrant virtual marketplace and community center, where users create, purchase, and sell digital real estate, contributed to its popularity. Nonetheless, as of September 1, 2023, 89.04% of investors holding the native SAND token are in the red.
The Enjin Coin ecosystem, the last of the four, provides developers with specialized software for creating and managing virtual products on the Ethereum blockchain. The native ENJ token holders have also endured a similar fate. Additionally, 75.5% of Enjin investors are currently in a substantial deficit position.
Can the Metaverse industry recover?
The prevalent social sentiment surrounding the metaverse is currently pessimistic. Nonetheless, this may attract strategic investors seeking to purchase the dip in anticipation of a future recovery.
Several factors suggest that the momentum is waning rapidly. First, security, long-term utility, and player retention continue to be criticised. Yet the Securities and Exchange Commission (SEC) of the United States has exacerbated the Metaverse’s problems.
The SEC lodged lawsuits against Binance and Coinbase in June 2023. The regulator identified The Sandbox, Axie Infinity, and Decentraland as “securities” in the filings. SAND decreased by approximately 44%, AXS by 33%, and MANA by 40% as a result.
Whether the Metaverse industry can recover from any setbacks or slowdowns depends on a complex interplay of technological, economic, and societal factors. These variables can be unpredictable, but they also provide opportunities for problem-solving and innovation. Given the substantial interest and investment in this concept, it is possible that the industry could recover and evolve, even if it faces challenges along the way.
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