The State of Crypto Gaming in the Bear Market
Tech Deep Dives

The State of Crypto Gaming in the Bear Market

Created 1yr ago, last updated 1yr ago

CoinMarketCap Academy takes a look at how the crypto gaming sector is faring in the current crypto winter.

The State of Crypto Gaming in the Bear Market

Table of Contents

The bull market — the time when raising virtual monsters and harvesting virtual potatoes feeds entire families in the real world.
That may not be coming back any time soon. But while the bull market bonanza may be over, blockchain gaming looks in (sort of) decent shape. Let's talk about the state of crypto games — also referred to as web3 games, blockchain games, GameFi, play-to-earn games — in this current crypto winter.
For the purpose of this article, we will refer to it broadly as crypto gaming, although terms are used interchangeably in this nascent industry.

CoinMarketCap Academy will cover:

  • Industry overview: who's playing, how many, what, when, and where.
  • Games overview: what are the top games, what happened to move-to-earn, and whether Axie is still alive.
  • Funding overview: where the money's going in the bear market.
  • News overview: new games are always in the works — we cover a few promising ones.
  • Problems overview: no one can fix the GameFi market but the market itself — let's talk broken token models.
Before diving into the article, for further reading, check out the recently-published CoinMarketCap Research and Naavik: state of blockchain gaming in 2022 report.

Join us in showcasing the cryptocurrency revolution, one newsletter at a time. Subscribe now to get daily news and market updates right to your inbox, along with our millions of other subscribers (that’s right, millions love us!) — what are you waiting for?

The Crypto Gaming Industry in Q3 2022 — Chugging Along

As is often the case in crypto, it's hard to clearly define the box.

That is why Delphi Digital quotes the market cap of GameFi at $6.15b on September 30, while checking the top gaming tokens on CoinMarketCap returns a valuation of $6.6b, at the time of writing on November 18. Regardless, there are only a handful of gaming tokens in the top 100, so the crypto gaming sector — at least those with tokens — has been suffering, too.
Things are looking better as far as on-chain activity is concerned. According to DappRadar, a full 48% of all on-chain activity comes from gaming (912,000 unique active wallets) in Q3 2022, more than double the number that DeFi has:

This is further amplified by the CMC and Naavik gaming report, which shows that unique active wallets (UAW), although currently stagnating, is in a slow upwards long-term trend:

Broken down by blockchains, most demand for games is on Wax:
However, if we look at the supply of games, most games are actually built on BNB Chain, according to Binance Research:

However, only 33% of crypto games are live, with many still in the development, beta or alpha stage:

Looking further into where players are playing, most crypto games are, unsurprisingly, on web browsers or mobile:
Finally, the popular genres of crypto games are action, followed by some adventure, collectibles, strategy, and RPGs:

But which games are players actually playing?

Crypto Games in Q3 2022 — Fresh New Faces

Yet again, it's not easy to precisely define which games are the most popular and, particularly, how many players are playing them. But Binance Research lists the top 5 games with the most active users in September 2022:

There is:

Gameta: a web3 gaming platform that brings web2 games to the blockchain.
Alien Worlds: a metaverse game set in space.
Benji Bananas: a hyper-casual mobile game, where players collect bananas.
Solitaire Blitz: a casual card game.
Splinterlands: a card collection game.

Gameta has seen a stellar rise, catapulting itself to the top spot with almost two million unique active users in September.

However, the most popular games are not necessarily the most valuable ones. Although you can argue about which of those are crypto games and which are metaverses (and whether those two aren't in fact the same), here's the top 5 by market capitalization:

We have:

The Otherside: a metaverse by Yuga Labs — the team behind BAYC, CryptoPunks.
The Sandbox: a popular metaverse which allows users to create and play games.
Decentraland: a leading virtual world with different districts and user-owned plots.
Axie Infinity: the play-to-earn pioneer.
STEPN: the move-to-earn pioneer.
Interestingly, the most played games are nowhere near the top five games by market cap when it comes to valuations — even though metaverses are in the early stages of development and have relatively lower active users. Trading volumes for metaverse virtual land NFTs are down over 90%. Even if some of the bubble has popped, the market is still giving these projects plenty of breathing space, considering their stage of development.

But the two real games on this list — Axie and STEPN — are worth a second look, given how popular they were at the peak of their powers.

Axie Infinity

Axie Infinity experienced a meteoric rise. At its peak, the token was worth over $150, and its market cap was over $10b. However, with the onset of the crypto winter, these days AXS trades below $10 and at a much more modest market cap of $900m. Furthermore, in the CMC x Naavik gaming report, Naavik posits that the unstainable play-to-earn model is in demise, with games moving to a free-to-own (F2O) model.
Daily unique active wallets for Axie were down 86% in Q3 compared to Q2. Still, the team had its first AxieCon conference this year, where they introduced their Land Project Kingdoms gameplay, alongside other gaming features like socializing, token gameplay, delegations, non-land owner gameplay, dungeons and more.


STEPN conquered the move-to-earn market in a flash. Well, STEPN created the move-to-earn market.

But just like in Axie's case — the game is still popular but the monthly active user count is down significantly:
That may also be due to the rise of a formidable competitor in Sweatcoin. We covered the details of Sweatcoin, which has over 1.3 million active users and over 1.5 million transactions thus far.

Unsurprisingly, the trend is down after the initial hype, and SWEAT is suffering from the same kind of selling pressure most gaming (or fitness) tokens suffer. But it's probably not the last iteration of move-to-earn games we have seen.

Crypto Games Funding in Q3 2022 — Where's the Money Going?

Funding is down, but that's not really a surprise (-48% quarter-on-quarter). But even with this down trend, the crypto games deal amount in 2022 is projected to outperform the amount in 2021 by a solid 100%+:
This downtrend trend in funding is also reflected in the CMC x Naavik blockchain gaming report:
Most of those investments are seed rounds and pre-series, where crypto gaming attracts the most money out of any sector. According to The Block Research, 35% of seed rounds and pre-series investments go to NFTs and Gaming. That is almost triple the amount that DeFi gets.

Meanwhile, Delphi Digital shared a few noteworthy funding deals in its September Gaming Insights overview:

Metaverse Go, a web3 gaming platform, raised $4.2m in a seed round.
Revolving Games raised $25m across two rounds to build Battlestar Galactica.
Animoca Brands raised $110m, bringing up its valuation to $5.5b.
Hadean (supported by EA) raised $30m to build metaverse infrastructure.
Immortal Game raised $15.5m to build a chess-focused game featuring NFTs.
Vulcan Forged raised $8m to expand its web3 gaming platform and build a metaverse game.

Crypto Gaming Projects To Keep an Eye on

No new games fresh out of the oven for the moment, but there are a couple of interesting NFT mints for games that may be promising.


Blocklords is a mixture of Age of Empires, Total War, and Crusader Kings and recently closed registrations for their first NFT collection. Developer MetaKings Studio raised $15m in Q1 to build the game.


Sparkadia is a metaverse of games with a flagship brawler game called Eden Brawl. The development studio behind it, Worldspark Studios, sold out their first batch of 8,000 NFTs this month.


LUXON is a web3 gaming platform that has raised $10.8m to build a turn-based strategy game called Desperado B218. The studio closed its first NFT airdrop and has a second one ongoing till the launch of the full game.

Internet Game

Internet Game is creating interactive community events centered around play and closed season two of its gaming event. It raised more than 300 ETH, with 120 ETH going towards the prize pool.


Civitas is an AAA strategy game that lets players control small city-states via subDAOs. The development studio raised $20m to build the game, which is to go live with an alpha version in 2023.

Legions & Legends

Legions & Legends is a collectibles & combat RPG set in a sci-fi/fantasy world developed by Aura Games. The developer raised $15m to build the game, which recently closed its first mint of 5,555 NFTs.

GameFi’s Achilles heel — Building a Sustainable Token Model

There's no two ways to go about this: Crypto games definitely has not figured out the tokenomics model for sustainable games.

AXS is down more than 90%. So are all the guild tokens that promised to build an entire field of employment around play-to-earn:

But what's going wrong, and why is it so difficult to build a sustainable token model into a game?
Nat Eliason has a fantastic essay on this called: Crypto Gaming is Broken. How Do We Fix It? If you're really into crypto games, you should read the entire piece. For the lazy types, here are Nate's arguments summarized:1.
1. NFTs set a bad precedent for games: NFTs are all about floor price and number go up. That is the wrong frame for games to be in.
2. DeFi set a bad precedent for games: Gaming shouldn't be focused on making passive yield from staking.
3. Most earnings are unsustainable: many games have poor economic designs, where more earnings increase earnings (and thus increase selling pressure).
4. The costs are too high for game lifecycles: considering how long a game's popularity lasts (at best a few years), web3 games are ridiculously overpriced.
5. Much of the work is bullshit: play-to-earn is just earning to click a few useless buttons without meaning or fun involved.
6. Too much power for people with capital vs. time: if you can afford buying a valuable NFT, you can make your initial investment back more quickly. This is unfair.
7. “Play to Earn” sets the wrong expectations for players: it shouldn't be play-to-earn but play-and-earn.

But what about possible solutions?

The Block Research suggests that not all web3 games need a token to begin with. For example, hyper-casual games (think CandyCrush) don't benefit from an added token because their only hook is to make players come back to keep their streak. But without long-term incentives, the token will always be inflationary and thus sold immediately.
Nate also gives several suggestions on how to fix web3 gaming, summarized below for brevity (read his entire post for explanations with examples):
1. Significantly reduce the cost to entry: regular games cost $60-$80, but web3 games have NFT collections worth thousands?
2. Create limitations on the power of new capital: games should have barriers for the rich to not have an unfair (starting) advantage.
3. Prioritize rewarding play not clicking: earnings should come from playing the game, not just clicking buttons to earn.
4. Get rid of staking: staking is a DeFi element that has no place in games.
5. Build a fun game first: games should be, y'know, fun?
6. Separate the external & internal economy as much as possible: players should have to check the token price to decide what to do in the game.
7. Obscure the ROI: earning mechanisms are fine but they should not be predictable.
8. Reframe expectations around P&E: players should expect to play first and earn second, not the other way around.
9. Not limiting play: time-based limitations should not stop the players from playing a fun game.

Of course, there is a whole long tail of design mechanisms like how many tokens to include and which token sinks to build into the game. But armed with these suggestions, developers already have a long laundry list of things to improve.

The CMC x Naavik Blockchain Gaming report also echoes some of the aforementioned points, adding that the crypto gaming sector has seen the transition from the unsustainable play-to-earn model, across various stages, to the free-to-own (F2O) model.

F2O “dramatically lowers barriers to entry by offering NFTs for free and not gating game access with sometimes absorbently high NFT (of multiple NFTs) purchase prices.” Naavik believes that this could be an important catalyst in accelerating the mass adoption of crypto games.


The old crypto gaming is dead. Long live the new crypto gaming! Or something like that.

Gaming is still one of the most promising verticals for blockchain to break into the mainstream. The old models were a nice experiment, but were never going to work out in the long run. To be fair, a lot of new games do look promising but have a long way to go before they can compete with legacy games.

Many traditional gamers or gaming companies remain hostile to NFTs and crypto gaming concepts. They see it as a quick cash-grab by companies and a way of blockchain encroaching on someone else’s turf without improving anything. And so far, they have been right about that.

Still, keep your eye on the gaming space because it's not going anywhere anytime soon.

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