During the crypto market boom in November 2021, the cumulative market value of the “big four” metaverse projects reached $16 billion. Analyst Ibrahim Ajibade explores the critical factors that will push 98% of metaverse altcoin holders to losses in 2023.
Metaverse left its mark on the 2021 rally, but…
At the market peak in November 2021, buzzwords like Metaverse, GameFi, and Play-to-Earn dominated the crypto space. Just two years later, many investors caught up in the Metaverse craze are now counting their losses. As you follow from Kriptokoin.com, during the 2021 crypto market rally, The Sandbox (SAND), Axie Infinity (AXS), Enjin Coin (ENJ) and Decentraland (MANA) were the four major projects that arguably dominated the Metaverse and GameFi sector.
Notably, the cumulative market cap of the four tokens totaled $16 billion at the November 2021 peak. At the time, these Metaverse tokens accounted for 0.5% of the $3 trillion global crypto market cap. However, as crypto winter began, Metaverse altcoin projects received widespread criticism, from security to privacy to community governance to a lack of long-term HODLing incentives.
Four major metaverse altcoin market caps drop 92%
As a result, as of September 2023, SAND, AXS, ENJ, and MANA are now collectively worth just $1.23 billion. This represents a staggering 92% decline compared to the $16 billion market cap recorded in November 2021. To put this decline into proper context, the market dominance of these four Metaverse tokens has now fallen to 0.12% of the global crypto market cap.
Metaverse Market Cap – ENJ, MANA, AXS, SAND | Source: SantimentMarket cap is a financial metric that represents the total value of a cryptocurrency’s circulating supply. It provides an estimate of the overall value of a Blockchain at a particular point in time. By summing up the market cap of four major metaverse altcoin projects, investors can get a clear picture of the sector’s systemic importance within the broader cryptocurrency market. This underlines that crypto investors have become increasingly disinterested in the metaverse sector over the past two years. And now, they’re allocating capital to other, more resilient sectors and emerging fads
The majority of Metaverse altcoin investors are reeling from losses!
The game may not be over yet. But those who bought into the 2021 metaverse hype are already counting their losses. IntoTheBlock’s Historical In/Out of the Money (IOMAP) data estimates the open or profitability levels of all wallet addresses holding a given token. It is obtained by comparing current prices with the average cost of acquiring these tokens. Historical IOMAP data below shows that the overwhelming majority of current ENJ, MANA, AXS and SAND holders are in the red.
Of the four major metaverse projects, the owners of Axie Infinity and The Sandbox are the worst off. Once known for its vibrant in-game economy, Axie Infinity is an NFT-based online video game developed by Vietnamese studio Sky Mavis. Historical data from IntotheBlock shows that 99.54% of all addresses that purchased AXS are currently “at a loss.”
Metaverse Historical Out-of-Profit data – AXS, SAND | Source: IntoTheBlockIn second place is the Sandbox project, a virtual world where players can build, own and monetize their gaming experiences. 98.34% of those who purchased the altcoin token are also currently underwater. Meanwhile, Decentraland and Enjin Coin investors are also far from profitable. Decentraland became popular for its live virtual marketplace and community hub where users create, buy and sell digital real estate. However, as of September 1, 2023, 89.04% of investors holding the native SAND token are also in negative territory.
Metaverse Historical Out-of-Profit data – MANA, ENJ | Source: IntoTheBlockThe last of the four, the Enjin Coin ecosystem, offers unique software that allows developers to create and manage virtual goods on the Ethereum Blockchain. Local ENJ token holders shared a similar fate. 75.5% of investors in Enjin are also currently sitting in a deep short position.
The chances of recovery for these altcoin projects are decreasing
To put it briefly, the cumulative market capitalization of ENJ, MANA, AXS, and SAND dropped 92% between November 2021 and September 2023, from $16 billion to $1.23 billion. But even more worrying, metaverse tokens’ dominance in the crypto industry has also decreased by approximately 76%. Apple’s Vision Pro launch and optimistic statements from Meta (Facebook) CEO Mark Zuckerberg triggered a slight revival in the Metaverse sector in July 2023. But now, that momentum seems to be quickly fading for a few reasons.
Firstly, criticisms regarding safety, long-term benefit and player retention still remain. Additionally, the U.S. Securities and Exchange Commission (SEC) has also stepped up Metaverse woes. In June 2023, the SEC filed lawsuits against Binance and Coinbase. The regulator listed Sandbox, Axie Infinity and Decentraland as “securities” in the filings. Following this, SAND lost approximately 44%, AXS lost 33% and MANA lost 40%. As a result, social sentiment surrounding metaverse altcoin projects is currently overwhelmingly bearish. Still, this could attract the attention of strategic investors looking to buy the dip in hopes of a future revival.
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