When there are no game tokens among the top 100 by market capitalization, it's time to rethink the narrative.

Author: Ryan S. Gladwin

Compiler: Deep Tide TechFlow

According to CoinGecko, after Immutable (IMX) fell out of the rankings on Monday, there are currently no game tokens among the top 100 cryptocurrencies by market capitalization. While there are still a few game tokens lingering at the bottom of the CoinMarketCap rankings, the conclusion is almost the same: the performance of top game tokens continues to be sluggish.

Although crypto games reached a peak in mainstream markets and player communities over the past year, related tokens quickly receded, and newly issued tokens struggled to gain attention.

According to data from the Wayback Machine, just a year ago, there were still 6 game tokens among the top 100 cryptocurrencies by market capitalization. At that time, the total market capitalization of game tokens on CoinGecko was $29.3 billion. However, despite more tokens being launched during this period, this figure has now plummeted by 68%, leaving only $9.24 billion.

The Ethereum gaming platform Immutable was once the last bastion, but its token IMX has seen a significant decline over the past year.

According to CoinGecko, in December 2023, IMX was the 31st largest cryptocurrency in the world by market capitalization. At the time, investment firm VanEck expressed strong confidence in Immutable and expected IMX to be among the top 25 in 2024. Even a year ago today, IMX was ranked 34th.

However, since then, IMX has plummeted 87% over the past year, due to factors including the overall cooling of the crypto gaming market and an investigation by the U.S. Securities and Exchange Commission (SEC), which Immutable recently stated has concluded.

In the past week alone, IMX has fallen by 29%, compared to Bitcoin’s decline of just over 10%. IMX became the biggest weekly loser in CoinGecko’s Top 100 list until it slipped out of the list and is currently ranked 103rd.

Other major gaming tokens that once ranked in the top 100 have also experienced significant declines over the past year. For example, Gala Games (GALA) fell by 80% (with a drop of 19% this week), and The Sandbox (SAND) dropped by 64% during the same period (with a decline of 16% in the past 7 days).

The once glorious old game tokens have plummeted significantly since their peak in 2021. Even the recently launched major game tokens have not escaped the predicament. The Pixels (PIXEL) token launched last year has dropped 98% from its peak, Notcoin (NOT) has fallen 94%, and Hamster Kombat (HMSTR) has also declined by 68%.

Last week, Gunzilla Games’ hit game Off the Grid and its Avalanche L1-based GUNZ network launched the GUN token, the largest in-game token offering in months. However, even though Off the Grid hasn’t integrated GUN into the game, the token has fallen 62% from its peak.

Higher quality games are rising.

“Off the Grid” has been rated by Decrypt as the Best Blockchain Game of 2024 (GG Game of the Year). The game shone brightly last fall, boosting the market’s positive perception of the current quality of crypto games.

This stands in stark contrast to the “Play-to-Earn” craze in 2021, represented by the simple gameplay monster battle game “Axie Infinity.”

“The crypto gaming market in 2021 could be said to be completely narrative-driven, with almost no real products, except for a few exceptions like ‘Axie,’” said the founder of Treeverse, who goes by the pseudonym Loopify, to Decrypt. “And now, a few years have passed, and there are indeed more products, but they still need time and have not really entered the mainstream market yet.”

At that time, “Axie Infinity” was far ahead of the competition, but its in-game economic system, token value, and player base suffered a severe blow in early 2022. Now, a number of higher-quality games have emerged in the market, some of which have attracted millions of players—although popularity and reputation do not always go hand in hand.

For example, “Hamster Kombat” attracted 300 million players last summer through its “Tap-to-Earn” Telegram game, despite the gameplay being simple and repetitive. However, since the token was launched in September, players have been leaving due to price issues, and the development team has been slow to launch subsequent seasons.

“Off the Grid” became one of the rare success stories in October last year, with its public launch becoming one of the most successful in the blockchain gaming field, even topping the Epic Games Store free games chart, surpassing “Fortnite”. Additionally, the farming simulation game “Pixels” and the card battle game “Parallel” received positive feedback from players and attracted a steadily growing audience, while the survival game “Crypto: The Game” gained niche popularity through viral spread.

“I actually think the current state of crypto gaming is pretty solid,” the GIA community manager at GIA, who goes by the pseudonym Jaxie, told Decrypt. “We have some great games coming online right now, and those games have the potential to introduce millions of players to the crypto ecosystem.”

But there are also mistakes.

Creating an excellent game takes time—just look at Rockstar Games, who have spent 7 years developing Grand Theft Auto 6, backed by a large team and financial support. This also explains why, despite the rise of crypto games a few years ago, we are only now starting to see some results.

However, crypto games that rush to success often end in failure. The Illuvium series is a case in point. According to CoinGecko, Illuvium’s token (ILV) was first launched in 2021 and quickly soared to a peak of $1,749, which sparked huge anticipation for the project. However, when the team launched three interconnected games in July 2024, the results fell short of expectations.

The actual performance of Illuvium has been disappointing, and its co-founder Kieran Warwick admitted in February this year that criticisms regarding the gameplay are “valid,” planning a complete overhaul of the game. Now, the price of the ILV token has plummeted 99.4% from its historical peak, currently standing at just $10.60.

The core issue of crypto games: game or token?

“99% of crypto games are not fun,” said a member of the crypto meme coin MLG team, who goes by the alias Munnopoly, in an interview with Decrypt. “They seem to be more about having the token first, then the game. I feel like they are constantly trying to bridge the gap with Web2 players.”

The failures of the crypto gaming industry have shown that the development of high-quality games takes time and patience, and that projects that rush to launch and lack depth will only disappoint players and cause the value of the token to plummet.

Deadrop, once highly anticipated, seems poised to bridge the gap between traditional gamers and Web3. Created by the former developers of Call of Duty and Halo, as well as well-known streamer Dr. Disrespect was involved in the development, and the game caught the attention of mainstream gamers. However, due to the cooperation between the development team and Dr. Disrespect fell out over allegations of inappropriate conversations with minors, and the studio announced closure after it ran out of funding in January of this year.

“I believe the cancellation of ‘Deadrop’ is a major setback for the field,” content creator MayorReynolds stated. “This game is one of the few projects that has the potential to stand on its own based solely on the game itself, while integrating Web3 features in a way that players can understand.”

However, it is not uncommon for gaming projects to cease operations due to depleted funds. Recently, the blockchain gaming ecosystem Treasure announced a large-scale restructuring and layoffs due to financial issues. According to a report by Blockworks last week, the developer of Shrapnel, Neon Machine, is also facing a funding crisis.

The development team of the Ethereum game “The Mystery Society” suspended the development of this social deduction game in February this year, and its co-founder Chris Heatherly bluntly stated that the blockchain gaming industry is full of disruptive behaviors.

“Greed and stupidity are stifling almost all participants in the space before they can prove themselves,” Heatherly said in an interview with Decrypt. “We need to focus on building healthy on-chain business models instead of continuing this fallacy of ‘token issuance is a Ponzi scheme.’ Every Web3 game founder I know is feeling frustrated and exhausted, doing everything just to survive, but the true belief is fading away.”

Reinventing the Narrative: Investors’ Attention Shifts

According to Loopify, the recent issue with gaming tokens is that investors’ attention has shifted to crypto assets that are more likely to yield quick profits. He pointed out that since the last gaming token bull market, investor interest has gone through meme coins, social finance (SocialFi), and has recently turned to the field of artificial intelligence.

As each wave of investment fever rushes towards new asset classes, the attention on game tokens is gradually declining. These tokens still exhibit high volatility in the market, but the recent decline has been even more severe.

“The narrative of crypto games has long disappeared, and the number of investors willing to pay has also decreased, as the crypto industry essentially follows trends,” Loopify said in an interview with Decrypt. “Even if these games are of higher quality and offer low-cost investment opportunities through NFTs, tokens, or equity, the market cannot immediately price them effectively. It takes time to reflect that.”

Jaxie raised a more fundamental question: Do crypto games really need their own tokens? He believes that what players truly care about is owning their skins through blockchain, rather than a game-specific token. While these tokens can bring speculative hype to the project, once the tokens crash, their negative impact is enough to shake the community and create unattainable expectations.

“Most games shouldn’t use their own tokens at all,” he said. “Launching a token is more like a marketing tool or a way to please existing users—don’t get me wrong, I will also go for airdrop farming—but it is not a truly useful game functional token.”

Recently, there has been a wave of token issuance for “tap-to-earn” games, each of which needs to incentivize players to keep clicking through tokens. However, these tokens often lack practical use after issuance, resulting in a rapid decline in value. From “Hamster Kombat” to “Catizen” and “Zoo”, similar stories play out over and over again.

In addition, the “play-to-airdrop trend” that was all the rage last year has once again distributed tokens to players, but players have little incentive to hold these tokens long-term. Similar to the early “Play-to-Earn” craze, this model attracted a lot of attention and enthusiasm in its initial stages, but the eventual collapse was equally painful for both projects and players.

“Most Web3 players are really just speculators in the crypto space, and their goal is to make money,” Jaxie said bluntly. “Most crypto games have a lifespan of only 90 days, after which the number of players drops significantly – so why contribute to an economy that you know is going to shrink dramatically in three months?”