When a Play-to-Earn token falls out of the top 100 in market cap, will the industry narrative be reshuffled again?

Original Article Title: Gaming Tokens Are Disappearing From Crypto's Top 100—What Happened?

Original Article Author: Ryan S. Gladwin

Original Article Translation: DeepTech TechFlow

According to CoinGecko data, following Immutable (IMX) dropping out of the rankings on Monday, there are currently no gaming tokens in the top 100 by market capitalization. While CoinMarketCap still has a few gaming tokens lingering at the bottom of the list, the conclusion is nearly unanimous: the performance of top gaming tokens continues to disappoint.

Despite the peak in popularity of crypto gaming in the past year among both mainstream markets and player communities, related tokens have rapidly declined, and newly issued tokens struggle to gain attention.

According to Wayback Machine data, just a year ago, there were 6 gaming tokens in the top 100 by market capitalization. At that time, the total market capitalization of gaming tokens on CoinGecko was $29.3 billion. However, despite more tokens being introduced during this period, this number has plummeted by 68%, now standing at only $9.24 billion.

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

According to CoinGecko data, in December 2023, IMX was ranked as the 31st largest cryptocurrency in the world by market capitalization. At that time, investment firm VanEck expressed strong confidence in Immutable, expecting IMX to break into the top 25 by 2024. Even just a year ago today, IMX was still ranked 34th.

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

In just the past week, IMX plummeted by 29%, compared to Bitcoin's drop of nearly 10%. IMX became the token with the largest weekly drop in the CoinGecko top 100 list, until it slid out of the rankings, now sitting at 103rd place.

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

Many of the once high-flying legacy game tokens have experienced significant drops since their 2021 peaks. Even recently launched major game tokens have not been able to escape the downturn. The token for Pixels (PIXEL), launched last year, has plummeted by 98% from its peak, Notcoin (NOT) has dropped by 94%, and Hamster Kombat (HMSTR) has also slid by 68%.

Last week, Gunzilla Games released the GUN token for its popular game "Off the Grid" on the Avalanche L1-based GUNZ network, marking the largest game token issuance in months. However, despite "Off the Grid" not yet integrating GUN into the game, the token has dropped by 62% from its peak.

A Rise of Higher-Quality Games

"Off the Grid" was named Decrypt's 2024 Blockchain Game of the Year and had a standout performance last fall, bolstering the market's positive perception of the current state of crypto gaming quality.

This is in stark contrast to the 2021 Play-to-Earn craze, where the flagship title was the simple gameplay monster-battling game "Axie Infinity."

"The 2021 crypto gaming market was completely narrative-driven, with hardly any real products except for a few exceptions like 'Axie,'" said Loopify, founder of the Treeverse game, to Decrypt. "Now, a few years later, there are indeed more products, but they still need time to truly enter the mainstream market."

Back then, "Axie Infinity" was ahead by a mile, but its in-game economy, token value, and player base took a hit at the beginning of 2022. Now, a new wave of higher-quality games has emerged in the market, with some attracting millions of players—though popularity and reputation don't always align.

For example, "Hamster Kombat" drew 300 million players last summer through its Tap-to-Earn Telegram game, despite its simple and repetitive gameplay. However, since the token's launch in September, players have exited en masse due to price issues, and the development team has been slow to roll out subsequent seasons.

"Off the Grid" became one of the few 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 and surpassing "Fortnite." Additionally, the farming game "Pixels" and the card battle game "Parallel" have received player acclaim and attracted a growing audience, while the survival game "Crypto: The Game" has become a niche favorite through viral spread.

「I actually think the current state of play-to-earn games is quite solid,」 said Jaxie, the pseudonymous community manager of the GIA play-to-earn gaming guild, to Decrypt. 「We are now beginning to see some excellent games come online that have the potential to onboard millions of players into the crypto ecosystem.」

But There Have Been Missteps

Creating a high-quality game takes time—just look at Rockstar Games, who have spent 7 years developing 'Grand Theft Auto 6' with a large team and financial support behind them. This also explains why, despite the hype around play-to-earn games starting several years ago, we are only now starting to see some results.

However, rushed play-to-earn games often end in failure. The Illuvium series is a typical example. According to CoinGecko data, Illuvium's token (ILV) launched for the first time in 2021 and quickly surged to a peak of $1749, sparking huge expectations for the project. However, when the team released three interconnected games in July 2024, the results did not meet expectations.

Illuvium's actual performance was disappointing, and its co-founder Kieran Warwick admitted in February of this year that criticism of the gameplay was 「valid,」 and plans to overhaul the game entirely. Today, the price of the ILV token has plummeted 99.4% from its all-time high to just $10.60.

The Core Issue of Play-to-Earn Games: Game or Token?

「99% of play-to-earn games are not fun to play,」 said Munnopoly, a member of the MLG meme coin team, in an interview with Decrypt. 「They seem more like they started with a token and then built a game around it. I feel like they have been continuously trying to bridge the gap with Web2 players.」

The various failures in the play-to-earn gaming industry suggest that the development of high-quality games requires time and patience, and rushed, shallow projects will only disappoint players, causing the token value to plummet.

The once-promising 'Deadrop' seemed poised to bridge the gap between traditional gamers and Web3. Developed by former developers of 'Call of Duty' and 'Halo' as well as popular streamer Dr. Disrespect, this game caught the attention of mainstream gamers. However, due to allegations of inappropriate conversations with minors against Dr. Disrespect that led to a fallout with the development team, the studio announced closure after running out of funds in January of this year.

「The cancellation of Deadrop is a major setback for this space,」 content creator MayorReynolds said. 「This game was one of the few projects with the potential to stand on its own based on the game itself, and integrate Web3 functionality in a way that players could understand.」

However, the halting of game projects due to running out of funds is not an isolated incident. Recently, the blockchain gaming ecosystem Treasure announced a large-scale restructuring and layoffs due to financial issues. And according to a report from Blockworks last week, the developer of Shrapnel, Neon Machine, also faced a funding crunch.

The development team behind the Ethereum game The Mystery Society paused development of this social deduction game in February this year, with its co-founder Chris Heatherly bluntly stating that the blockchain gaming industry is rife with destructive behavior.

「Greed and stupidity are choking almost every participant before they prove themselves in this space,」 Heatherly said in an interview with Decrypt. 「We need to focus on building a healthy on-chain business model rather than perpetuating this fallacy of 'token issuance as a Ponzi scheme.' Every Web3 game founder I know is frustrated, exhausted, and everything they're doing right now is just to survive, but true belief is fading fast.」

Reshaping the Narrative: Investor Attention Shift

According to Loopify, part of the recent issue with game tokens is that investor attention has shifted to more likely fast-profit crypto assets. He noted that since the last game token bull market, investor interest has gone through meme coins, SocialFi, and recently turned to the field of artificial intelligence.

With each wave of investment frenzy flowing into new asset classes, the focus on game tokens has gradually declined. While these tokens still exhibit high volatility in the market, the recent downturns have been more severe.

「The narrative of crypto games has long disappeared, and the number of investors willing to pay the bill has decreased as the crypto industry inherently 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.」

Jaxie poses a more fundamental question: Does crypto gaming really need its own token? He believes that what players truly care about is owning their skins via blockchain rather than a game-specific token. While these tokens can generate speculative hype for a project, once the token collapses, the negative impact is enough to shake the community and create unattainable expectations.

“Most games really shouldn't have their own token,” he said. “Launching a token is more like a marketing tool or a way to appease existing users — don't get me wrong, I'll also participate in airdrops — but it's not a truly useful in-game utility token.”

Lately, the “tap-to-earn” trend has triggered a wave of token issuance in games, with each game requiring players to continuously tap for rewards. However, these tokens often lack practical use after issuance, leading to a rapid devaluation. From Hamster Kombat to Catizen and Zoo, similar stories have played out repeatedly.

Furthermore, last year's popular “play-to-airdrop” trend once again saw tokens distributed to players, but players had little incentive to hold onto these tokens long-term. Similar to the early “play-to-earn” craze, this model initially garnered significant attention and enthusiasm, but the eventual collapse was equally painful for projects and players alike.

“Most Web3 players are actually just speculators in the crypto space; their goal is to make money,” Jaxie bluntly stated. “The lifespan of most crypto games is only 90 days, after which the player count drops significantly — so why contribute to an economy you know will shrink dramatically in three months?”

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