Why Is STEPN Crypto Down 9% Today?

What happened

Popular move-to-earn game STEPN (CRYPTO: GMT) has seen some incredible volatility of late. Over the past week, GMT tokens have traded in a very large band between $0.77 and $1.13, settling down toward the $0.85 level at the time of this writing.

Unfortunately for investors, the recent trend for this project has been negative. Over the past 24 hours as of 4 p.m. ET on Tuesday, STEPN has declined 9.6%. 

This decline follows a decision made last week by the development team behind STEPN to introduce a new feature for its game, which is played on an app as users move in real-world space. The introduction of Health Points effectively limits the use of sneakers, which are non-fungible tokens (NFTs) used to earn rewards as users exercise, making it more costly to play this move-to-earn game. 

So what

The whole idea behind STEPN is intriguing. For investors who buy a sneaker NFT (necessary to play the game using the app), gems can be received as redeemable rewards for moving specific distances. Thus, for simply exercising, you can make money. That's a positive incentive if I've ever heard one. 

However, there are questions of how sustainable STEPN's model is, given the inflationary nature of rewards, which are effectively minted on an ongoing basis. And that has many worried about the long-term viability of this project. Aside from sneaker NFT sales, there isn't really a source of income from which to pay out these rewards.

Accordingly, the STEPN team has decided to force users to upgrade their NFTs periodically (by trading in a "worn" sneaker and buying a new one) or risk having them become ineffective. The goal is to ensure the sustainability of this project in the long term.

Now what

For users who invested in STEPN NFTs and now find that their sneakers are worn out, this news is reasonably unpopular. The return on investment that was once positive for an NFT might not be as enticing now. Accordingly, the ultimate impact on this network's cryptocurrency is yet to be determined.

Some investors in GMT tokens might look at this news as positive, at least in the long term. Rewards need to be sustainable, and it's good to see the STEPN team think about this issue. Additionally, despite this recent news, there are indications that NFT sales remain strong in the community. Until there's a dramatic downtick, perhaps there's little to worry about.

Today's decline appears to be more macro-focused in general. That said, NFT sales of STEPN sneakers will be a key metric investors interested in this project will want to monitor moving forward (physically and financially).