The year 2022,  so-called the “Crypto Winter” was brutal for everyone associated with Blockchain, and Crypto, and the GameFi sector was not an exception.

In Q4, 2022 the GameFi sector reached an all-time low of $60 million in funding, which was a consecutive decrease of 69% MoM. Apart from that another concerning factor was the loss of profits the gamers faced when compared to the Bull run of 2021. The average profits of a gamer came down by 50% in the era of the “Crypto Winter”.

The reasons for the failure of GameFi and the subsequent losses have been related to poor in-game token economy designs which have been unsustainable and have resulted in the token price as well as the sentiments of users crashing.

Market Overview

Decrease in Active Users

It can be assessed from the market trends when seen in the Active User area, there was seen a consecutive downward trend since the onset of Q4, 2022. 

However, a recent study from DappRadar found that in the first month of 2023, gaming accounted for almost 50% of all blockchain activity.

With the onset of 2023, the sector has been witnessing some stability when it comes to Monthly Active Users (MAUs) as well as new users joining and interacting with the games.

This can surely indicate a potential rise in future active users as the market continues to heal.

GameFi Volume

The Daily Volume fluctuated greatly throughout January, reaching its peak on January 23 due to the Axie Infinity token unlock event. On January 29, the downward trend came to an end, revealing a low but stable situation.

The Monthly Volume in January is down significantly from October and has been on a steady downward trend since April, 2022.

GameFi Protocols by Chain

Following the decline in December, the number of games began to increase slightly, with 22 new games introduced, which is an increase of 1.01% on a MoM basis.

VCs and Funding Arena

Despite the increase, the monthly funding amount remained below $100 million, indicating that VCs are losing faith in the Gamefi market. The need for a new driving force in the Gamefi market seemed more pressing than ever. 

CZ once extended his endorsement in Metaverse & VR in an AMA in early February, which should be strong support for the growth of the Gamefi market in such circumstances.

On January 17, Web3 and Carry1st completed a $27 million round of financing led by BITKRAFTVentures, with participation from Andreessen Horowitz (a16z), TTV Capital, and Alumni Ventures.

Intella X, a Web3 gaming platform, announced the completion of a $12 million financing round led by Polygon, Animoca Brands, Magic Eden, Wemix, and Global Coin Research on January 18th.

The game studio Voldex completed the A round of investment led by a16z on January 25, the amount of which has yet to be disclosed.

On Chain Analysis

User Traction

Overall, polygon surpassed BSC in terms of user count in January, compared to December. Polygon and Hive are both gaining popularity. Meanwhile, BSC fell and Wax maintained its lead, indicating that Alien World remains the most popular game in the Gamefi space.

Trading Volume

This month, Ronin is up 23% over the previous month, ranking first with a massive 70% share thanks to Axie Infinity’s massive foundation. While BSC and Polygon lost their share because Ronin reclaimed it, these two chains still have natural advantages in the Gamefi space.

Trending Games

Dookey Dash, released by Yuga Labs, was the most popular game in January, with over 25K players clocking more than 700K hours of playtime.

Top 10 Games at end of January 2023

ApeCoin took the top spot, rising 34% in a week thanks to the successful launch of Dookey Dash.

Despite the release of 4.8 million $AXS tokens (approximately $58 million), Axie Infinity experienced a 47% increase in its price.

We saw gaming names like STEPN, MAGIC, and RNDR perform well in the market without any significant developments or news.

Additionally, in January, the market caps of the top gaming tokens rose by an average of 122%, with Gala (GALA), the digital utility token that is a part of the Gala Games ecosystem, rising by a whopping 218%.

As news from the industry spreads to general audiences, interest in these gaming tokens has increased. For instance, Gala Games jumped to the headlines after acquiring a new mobile gaming studio with 15 games and $20 million in assets managed.

Beyond the list, NFT Worlds saw a 183% jump, MAGIC up 85%, and EPIK Prime up 80% over the last week as metaverse-related projects started performing well in relatively dead markets.

Conclusion

The Gamefi market did not end well in 2022, and the start in the first month of 2023 had been steady with all related figures, MAU, Volume, and Fundraising, mostly being stagnant. 

In January, the AI concept dominated the crypto market, making the Gamefi space even more desperate to find a new driving force.

Over the last year, Gamefi has been one of the hottest industries favored by venture capitalists, but recent fundraising trends indicate that this is changing.

GameFi may have been defeated in 2022, but industry leaders’ excitement for 2023 is not unfounded. With rising interest in the sector and many projects still in the works, 2023 could be a make-or-break year for GameFi. If and when the market recovers, we hope that players will pick up their controllers and immerse themselves in the new and unique experiences that GameFi has to offer.