Axie Infinity Token (AXS) and Smooth Love Potion (SLP), the native tokens of the Axie Infinity Web3 game, have sharply declined, dropping over 90% from their peak values.
The writing on the wall is that Axie Infinity, a pioneer of the Play-to-Earn (P2E) Web3 gaming model, is losing its initial appeal and widespread popularity.
A quick look at AXS’s charts shows a marked decline, beating expectations, especially considering its remarkable 5095.48% price gain at its peak. In just one year, its value surged from $0.1234 to $165, reaching a market capitalization of 9.7 billion dollars.
The story’s the same for AXS’s sister token, SLP. At its peak of $0.4191, SLP was a sought-after asset for Axie Infinity gamers. However, with the fading hype, the price has dropped well below its initial value to $0.00223, a staggering 98.88% decline from its all-time high, shedding $179 million from its market cap.
Given the current state of these tokens, one can’t help but wonder what happened to the initial excitement that made Axie Infinity so popular and its tokens so valuable.
To The Moon And Back, Literally
As the flagship “Play-to-Earn” game, Axie Infinity took the industry by storm in 2021, attracting over 2.7 million daily users. The bull market and blockchain gaming hype led to a surge in users, making playing the game a full-time business for some.
Some users found financial success, earning thousands of dollars monthly by investing in Axies, the game’s main characters. These characters, also NFTs, could be rented by other players who paid a commission to the owners.
However, the bear market crept in -new money ceased flowing in, and the entire ecosystem started showing signs of vulnerability.
By March 2022, amid a blistering crypto winter and diminishing investment interest in the sector, the game’s daily active user base dwindled to just under 1.5 million, a stark decline from its peak of 2.7 million in late 2021.
Simultaneously, SLP’s value plummeted from approximately $0.40 to a mere $0.02. This fall raised serious doubts about the sustainability of the blockchain gaming industry as it dragged its sister token, AXS, down with it.
Despite the challenges, the Axie Infinity team made significant efforts to attract new investment and retain both players and investors with their long-term commitment. Then came a major setback—the disclosure of a significant hack that struck at the core of Axie Infinity.
A newsletter article released on March 29 revealed that the Ronin Bridge, a crucial gateway for liquidity between Ethereum and the Ronin sidechain, had been compromised. Hackers suspected to be members of the infamous North Korean Lazarus Group made away with $620 million worth of crypto. AXS dropped from $50 to $5 within days after the hack.
The sharp decline in the value of these tokens has had far-reaching consequences and a significant issue they had is one that has plagued many crypto tokens: a lack of compelling utility.
Do SLP and AXS Really Have No Real, Compelling Utility?
The primary motivation for Axie Infinity players was the benefit of earning Smooth Love Potion (SLP) tokens, which translated to substantial earnings in USD during the peak hype phase.
This surge was driven by the high demand for SLP, fueled by a wave of new investors who needed it for gaming activities. The demand exceeded supply, causing a significant and rapid increase in SLP’s price.
The tokenomics of SLP and AXS is one that combines two tokens to do what one can do with more room for more utility. However, one challenge Axie Infinity didn’t anticipate was the potential oversupply of SLP compared to demand.
The heavy reliance on SLP as a utility token left the system vulnerable to inflation. The process of minting and burning SLP tokens helps maintain circulation, but an excess in circulation diminishes their value. Since players primarily play to earn SLP, they tend to sell their tokens for profits, compounding the problem.
The price of SLP has plummeted from $0.41 to just half a cent ($0.004) due to a lack of new investments, prompting players to question the worthiness of investing their time in the game. Hyperinflation in both tokens and in-game assets highlights the need for a constant flow of new capital to maintain player liquidity.
When the influx of funds stagnates, the value of SLP tokens and assets experience a dramatic decline, dragging down the governance token, AXS. The continuous minting and dumping of SLP tokens resulted in rapid devaluation, requiring a perpetual influx of fresh capital to sustain the ecosystem, an inherently unsustainable model.
Looking at both charts, it’s really a case of a promising project with terrible tokenomics. The fact that most of the game’s players were onboarded for the singular aim of exploiting the game economy underlined a bad outlook towards community growth.
Currently down over 95%, both AXS and SLP will have to be propped up with investor funds, meaning new players and fresh interest have to be generated to bring this to reality.
Both tokens are at risk of not reaching their all-time highs until the team introduces more compelling utility to incentivize players and investors against selling their tokens. Currently, the primary use is acquiring them for sale in fiat, with little interest in holding or long-term investment. This presents a concerning sign, evident in the charts.
Final Thoughts
The rise and fall of Axie Infinity presents a vivid illustration of the challenges and intricacies within the blockchain gaming world. Initially celebrated as a groundbreaking “Play-to-Earn” game with the potential to lift individuals in low-income nations out of poverty, the project’s extraordinary success drew substantial investments and player interest.
However, the unpredictable nature of its native tokens, combined with a lack of compelling utility beyond selling for fiat, resulted in a drastic decline in value and a significant loss of players.
Axie’s current state serves as a stark reminder that the crypto gaming space is still in a state of evolution, with no guarantees of sustained success without a robust and sustainable economic model. To rekindle momentum and attract new interest, Axie Infinity must explore innovative ways to provide enduring value to players and investors beyond the pursuit of short-term gains.
Disclaimer: This piece is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
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