What happened
As the cryptocurrency market bounces off of this weekend's lows, investors are asking a very pertinent question: is this a dead cat bounce, or a sustainable rally off what could be the lows?
For crypto gaming tokens Axie Infinity (AXS), The Sandbox (SAND 0.66%), and STEPN (CRYPTO:GMT) it's certainly an interesting question. That's because as of 11am ET, these three tokens have rocketed 10.3%, 7.8%, and 26% higher, respectively, over the past 24 hours.
This move in Axie Infinity appears to be an old-fashioned bounce off of highly oversold conditions. Both the AXS and SLP tokens, paid out as rewards to users playing the Axie Infinity play-to-earn game, have collapsed dramatically from their highs late last year. Deteriorating metrics for user count have exacerbated this decline, as profiteers move off this platform. It appears many in the community have viewed this "flushing out" of speculators as beneficial for the long-term prospects of this game.
The Sandbox has a couple of interesting catalysts that appear to be behind this token's rally. This past week, Mastercard (MA -0.08%) announced the company would be partnering with The Sandbox and other NFT-related marketplaces. This partnership has been seen as an attempt for the payments giant to gain a foothold in Web3. Additionally, Lionsgate announced a partnership with The Sandbox to bring a film and TV destination to life in the network's high-profile metaverse.
For STEPN, a bit of a different crypto gaming token, volatility has been the name of the game since the listing of GMT earlier this year. A "move-to-earn" project, STEPN rewards users for exercising, paying out tokens that have surged in value, before falling back to earth recently. That said, GMT currently trades at a premium of more than 400% from its original listing price in March, making this one of the hottest tokens in an otherwise ice-cold market.
So what
Each of these gaming-related tokens has its own set of idiosyncratic factors to consider. That said, macro forces which have driven the valuation of the entire crypto market below the $1 trillion threshold have certainly weighed on these high-profile tokens in 2022.
Rising rates and the removal of highly accommodative monetary policy are making the more speculative and higher-risk parts of the market difficult to invest in. As most investors look to de-risk their portfolios, cryptocurrencies and other risky assets are the first to be sold. Thus, until this bear market shows signs of a reversal, it could be tough sledding ahead for these noteworthy projects.
That said, the continued proliferation of partnerships between corporations and metaverse projects, as well as strong support for STEPN as a unique move-to-earn platform, provide many long-term investors with hope.
Now what
Picking a bottom in any market is generally a fool's errand. It's impossible to tell whether this rally we're seeing (on a day when the markets are closed, no less) is likely to be sustained for any meaningful period of time.
However, it is encouraging to see investor support for high-growth projects materialize during this downturn. Maybe there are still a few lingering investors willing to buy the dip. Or perhaps some short-sellers are taking profits at levels we haven't seen since 2021. Whatever the case, there's an inkling that positive momentum may still be possible in this bear market.
