Axie Infinity Faces Bearish Momentum Amid Player Decline

2023-08-15, 08:22

[TL; DR]

Axie Infinity is a blockchain based video game that enables players to earn digital tokens.

Axie Infinity Shards (AXS) and Smooth Love Potions (SLP) are the main tokens for the Axie blockchain.

The players can acquire, breed, raise and trade axies which are pet creatures that exist in the form of NFTs.

The AXS token is in a bearish momentum and its price is likely to fall further.

Introduction

The popularity and sustenance of blockchain games depends on the number of active users they have. As a result, when the number of active users of a gaming platform decreases the creators start to worry. Axie Infinity, the first web3 gaming protocol to use the play-to-earn model, is facing a remarkable decrease in the number of players which is negatively affecting the price of its native token, AXS.

In this guide, we cover Axie Infinity’s current user status and the challenges it is facing. We will also discuss its price performance.

Understanding Axie Infinity Blockchain Game

Before we discuss the decline in Axie Infinity users let’s look at what it offers. Developed by Vietnamese Sky Mavis and launched in 2018, Axie Infinity is a blockchain gaming platform which involves breeding, raising and trading creatures called Axies which battle against each other. These creatures exist as non-fungible tokens (NFTs) for this play-to-earn gaming economy.

Axie Infinity is a play-to-earn game where players acquire and sell various in-game items like real-estate, accessories and Axies through its NFT marketplace. Axie Infinity is similar to most video games except that it exists on the Ethereum blockchain.

The Axie game is fun, entertaining and educative which has attracted many players over the past years. Each player should have at least three Axies to play the game. However, these Axies have different attributes, a reason why a player may need more than three of them to become competitive during the games.

Axie blockchain has two major tokens namely Axie Infinity Shards (AXS) and Smooth Love Potions (SLP) which investors can buy, hold and sell. AXS is the blockchain gaming platform’s governance token which enables its holders to contribute to its decision-making process in terms of its developmental agenda.

On the other hand, SLP is mainly used in-game to reward the players. Both SLP and AXS are ERC-20 since they exist on the Ethereum blockchain.

Axie Infinity is Underperforming

Since the start of this year Axie Infinity has been underperforming due to several reasons which include the fear of a global recession. Although the value of AXS surged after the popular AxiETH gaming which took place in Thailand, that momentum is over and its price has fallen to around $6. The major reason behind its bearish performance is a sharp decline in the number of users.

The historical data about Axie Infinity shows that it started experiencing a decline in its user base in 2022. However, the trend has continued to the present time. As a fact, in November 2022, Axie Infinity lost about 20% of its players. There was also a noticeable decrease in its users in February as the following diagram shows.

Player Decline for Axie Infinity - Activeplayer

As the diagram indicates, there had been a gradual increase in Axie Infinity’s number of players from October 2020 to February 2022. From that time, its player base decreased gradually throughout the rest of the year. Worse still, from March of this year it has been recording small numbers of active players, which has also negatively affected the value of its token, AXS.

During the last four months the number of active users decreased to as low as a quarter of a million. According to data from Santiment, on 21 July 345 new wallet addresses were recorded on Axie Infinity. Nonetheless, on 2 August the AXS network grew by only 75 new wallet addresses, a decrease of about 78%.

Such a decline in the number of new wallet addresses indicates a growing bearish momentum. It is essential to note that the Network Growth, which shows the number of daily new wallet addresses, indicates how a network is attracting new users.

A decrease in the number of new wallets addresses or users shows that the demand for the network’s crypto asset like AXS is likely to decrease in the near future which may result in a fall in its price. Therefore, the decline in the number of new wallet addresses on the AXS network shows a waning interest in the token which has created a bearish momentum.

Reasons Behind the Decline in AXS Network Growth

Several factors may be contributing to the decrease in the number of the AXS network new users.

One factor that is contributing to the decline in AXS Network Growth is the persistent decrease in the value of the AXS token. According to IntoTheBlock 98% of AXS holders have unrealized loss. This discourages other investors from joining the network.

The launch of several play-to-earn games in recent months means that Axie Infinity’s potential market share has been decreasing. For instance, StepN, a “move-to-earn game, has been attracting many players over several months now.

Also, there has been a decrease in the earning potential of Axie Infinity over the months. The decline in its earning potential has driven away many players from countries like the Philippines who used to treat their participation on Axie Infinity as a job.

AXS Price Prediction

The AXS price of $6.03 is currently more than 58% lower than its 2023 peak recorded in January. Its high unrealized loss is influencing long term investors to disinvest from it which creates more bearish pressure.

The IntoTheBlock’s In/Out of Money Around Price (IOMAP) data indicates that the AXS price may further fall to $5 if the decline in daily active users continues. There is also fear that its value may fall towards the $4 resistance level.

Nevertheless, if the AXS bulls stop selling their holdings its price may rebound to $7 or even rise to $8. Sadly, the 10,170 wallet addresses that purchased 103.2 million AXS tokens at a price of around $6.12 may offer much resistance.

Conclusion

Axie Infinity, the first gaming protocol to use the play-to-earn model, is facing distressing times as its daily active users and new wallet addresses continue to decrease. As a result, the price of AXS has been falling constantly over time. The token is currently bearish and is trading at $6.03.

Author: Mashell C., Gate.io Researcher

*This article represents only the views of the researcher and does not constitute any investment suggestions.

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