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

Original author: Ryan S. Gladwin

Original compilation: Deep Tide TechFlow

According to CoinGecko, after Immutable (IMX) dropped out of the ranking on Monday, there are currently no game tokens among the top 100 cryptocurrencies by market cap. While there are still a few game tokens lingering at the bottom of the list according to CoinMarketCap, the conclusion is almost unanimous: the performance of top game tokens remains sluggish.

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

According to data from the Wayback Machine, just a year ago, there were 6 game tokens among the top 100 cryptocurrencies by market capitalization. At that time, the total market capitalization of the game token category on CoinGecko was $29.3 billion. However, despite the launch of more tokens 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 fallen significantly over the past year.

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

However, since then, IMX has plummeted 87% in 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) (Immutable recently stated that the investigation has concluded).

In just the past week, IMX has fallen by 29%, while Bitcoin’s decline was only around 10%. IMX became the token with the largest drop in the top 100 list on CoinGecko that week, until it slipped out of the ranking and is currently ranked 103.

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

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

Last week, Gunzilla Games’ popular game “Off the Grid” and its GUNZ network based on Avalanche L1 launched the GUN token, marking the largest game token issuance in months. However, even though “Off the Grid” has yet to integrate GUN into the game, the token has already dropped 62% from its peak.

Higher quality games are on the rise

“Off the Grid” was rated as the Best Blockchain Game of 2024 (GG Game of the Year) by Decrypt. The game shone brightly last autumn, 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, which was represented by the simple gameplay monster battle game “Axie Infinity.”

“The crypto gaming market in 2021 can be said to be entirely narrative-driven, with almost no real products, except for a few exceptions like ‘Axie,’” said Treeverse game founder Loopify to Decrypt. “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.”

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 left due to price issues, and the development team has been slow to take action on launching subsequent seasons.

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

“I actually think the current state of crypto games is quite solid,” said Jaxie, the community manager of the crypto game team GIA, to Decrypt. “We now have some excellent games starting to launch, which could bring millions of players into the crypto ecosystem.”

But there are also mistakes

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

However, the eager-to-succeed crypto games often end in failure. The Illuvium series is a typical example. According to CoinGecko data, the token of Illuvium (ILV) was launched in 2021 and quickly soared to a peak of $1,749, which generated huge expectations in the market for the project. However, when the team launched three interconnected games in July 2024, the results did not meet expectations.

Illuvium’s actual performance has been disappointing. Its co-founder Kieran Warwick admitted in February this year that the criticism regarding gameplay is “reasonable” and plans to implement a comprehensive overhaul of the game. Now, the price of the ILV token has plummeted 99.4% from its historical peak, currently sitting at only $10.60.

The Core Issue of Crypto Games: Game or Token?

“99% of crypto games are not fun,” said a member of the crypto game meme coin Munnopoly’s MLG team during an interview with Decrypt. “They seem to be more about having a token first and then a game. I think they are struggling to bridge the gap with Web2 players.”

The various failures in the crypto gaming industry indicate that developing high-quality games requires time and patience. Projects that rush to launch and lack depth will only disappoint players, causing the value of their tokens to plummet.

Once highly anticipated, “Deadrop” seems poised to bridge the gap between traditional gamers and Web3. Developed by former developers of “Call of Duty” and “Halo” along with well-known streamer Dr. Disrespect, the game has caught the attention of mainstream players. However, after a fallout between the development team and Dr. Disrespect over allegations of inappropriate conversations with minors, the studio announced its closure after running out of funds in January this year.

“I think the cancellation of ‘Deadrop’ is a major setback for the field,” content creator MayorReynolds said. “This game is one of the few projects that has the potential to stand on its own merit and integrate Web3 features in a way that players can understand.”

However, it is not uncommon for gaming projects to halt operations due to depleted funds. Recently, the blockchain gaming ecosystem Treasure announced a large-scale reorganization and layoffs due to financial issues. According to a report from 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 stated that the blockchain gaming industry is full of destructive behavior.

“Greed and stupidity are killing almost all participants before they can prove themselves in this field,” 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 equals a Ponzi scheme.’ Every Web3 game founder I know feels frustrated and exhausted; everything they do now is just to survive, but the true belief is gradually fading away.”

Reshaping the Narrative: Shifting Investor Attention

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

As each wave of investment frenzy flows into new asset classes, the attention on gaming tokens is gradually declining. These tokens still exhibit high volatility in the market, but the recent drop has been more severe.

“The narrative of crypto games has long disappeared, and the number of investors willing to pay has also declined, 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 create speculative hype for projects, once the tokens crash, their negative impact can shake the community and create unrealistic expectations.

“Most games shouldn’t be using 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 would also go for airdrop farming—but it’s not a truly useful game utility token.”

Recently, “tap-to-earn” games have sparked a wave of token issuance, with each game needing to incentivize players to keep clicking through tokens. However, these tokens often lack practical use after issuance, leading to a rapid decline in value. Similar stories have played out repeatedly from “Hamster Kombat” to “Catizen” and “Zoo.”

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 for the long term. Similar to the early “Play-to-Earn” craze, this model attracted a lot of attention and enthusiasm in its early stages, but the eventual crash was equally painful for both projects and players.

“Most Web3 players are actually just speculators in the crypto space, and their goal is to make money,” Jaxie stated. “Most crypto games have a lifecycle of only 90 days, after which the number of players will significantly decline—so why contribute to an economy that you know will shrink drastically in three months?”