Today, the crypto market is flashing red, with most major tokens trending downward in early afternoon trading. However, as of 12:15 p.m. ET, popular metaverse cryptocurrencies are seeing even more dramatic declines.
Enjin Coin (ENJ 8.32%), Axie Infinity (AXS), Decentraland (MANA -0.33%), and The Sandbox (SAND 1.86%) dropped 11.7%, 9.8%, 8.7%, and 8%, respectively, over the past 24 hours. These moves greatly outpaced the overall market, which still declined by 6% over this time frame.
Much of this decrease appears to continue to stem from the high-profile hack of Ronin, the Axie Infinity bridge built by Sky Mavis, the company behind the project. Bridges are integral to the proper functioning of the play-to-earn blockchain gaming space, and trust among key platforms has been hurt by this hack.
Additionally, concerns around a recent metaverse fund launched by HSBC for private clients in Hong Kong and Singapore appears to have created quite the buzz in the metaverse community. This fund's core holdings have yet to be disclosed, leading investors to remain unclear on which specific crypto assets to consider in this growing space.
Most risk assets are down today, as interest rates continue to rise ahead of the next Federal Reserve meeting. With money becoming more expensive, the amount of capital that may be allocated toward high-growth areas of the market, such as the crypto metaverse, is being discounted.
Lower valuations across the board aren't good for investors in any asset class. However, for metaverse-related tokens such as The Sandbox, Axie Infinity, Decentraland, and Enjin Coin, these concerns are exacerbated by a number of sector-specific headwinds. How this sector will continue to grow, given concerns around bridges and opacity related to investments, remains to be seen.
There's certainly a lot to like about where the metaverse could be headed, from a growth perspective. Crypto investors have seen early capital compound at an incredible rate through last year, with less-impressive gains in 2022.
Whether this sector can rebound depends on a number of factors. There are clear "plumbing" issues with bridges that need to be addressed. That's perhaps the key factor investors remain concerned about right now.
Accordingly, this space is one that may continue to be volatile for some time, until positive sentiment returns. Until then, I'm going to remain safely on the sidelines with these tokens.