Metaverse Index Monthly Update - August 2021
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The Metaverse Index, MVI, had another strong month of performance in August as the hype around NFTs reached record levels. MVI returned 61% for the month, outperforming both ETH and BTC, which returned 35.4% and 13.4%, respectively. MVI is up 29.8% since its inception in April and outperformed BTC by nearly 50% over that period while still underperforming ETH by about 33%.
Looking at the performance and risk data, MVI's correlation to ETH and BTC remains essentially unchanged from the previous month, sitting at 0.77 and 0.70 since inception. The same can be said about MVI's beta, currently at 1.07 for ETH and 1.36 for BTC. Net capture ratios have improved after solid performance numbers in August. Since its inception, MVI captured 157.2% of BTC's upside and 119.8% of its downside, resulting in a net capture ratio of 37.4%. For ETH, net capture improved from -7.9% to -1.2%. As of the end of August, MVI is capturing 106.3% of ETH's upside and 107.5% of its downside.
The current state of NFTs reminds us of DeFi summer at best and 2017 ICOs at worst, or perhaps just a combination of the two. However, we believe that the recent developments, including technological progress and media awareness, are making the Metaverse ever more inevitable.
MVI stats aka "deep alpha"
With some of the high-level performance data out of the way, let's take a look at non-performance stats for MVI.
After growing by 33,000 units of 36% in July, MVI unit supply increased by another 33%, or 40,470 units in August. Alongside the growth of unit supply, we also saw a significant increase in the number of addresses holding MVI. After 54% m-o-m growth in July, new addresses grew by 42% in August. There are currently more than 3300 addresses with MVI exposure.
It is particularly interesting to note that while addresses holding <10 MVI make up 53% of all holders, this only equates to 3.8% of AUM. The lion's share still comes from 0.8% of holders that hold 30.4% of AUM (>750 units). In dollar terms, that's 25 addresses with $6.3m between them. The second-largest cohort, however, is those holding between 50 and 249 units (~$5k to ~$25k) as they make up 28.4% of the AUM, ahead of addresses containing 250 to 749 units.
Beyond the numbers, if we look at the social layer, we have seen growing support and recognition of MVI as an easy and beginner-friendly way to participate in the Metaverse trade.
Portfolio performance
Following in July's footsteps, August saw all but one MVI token deliver positive returns. While July's performance was disproportionately driven by the 650% appreciation in AXS, August's numbers were much more balanced. In fact, 6 tokens returned over 100%, and ERN wasn't far away at 97.1%.
RARI was the best performing token in the MVI, rallying 140% in August. While it is still down 36% from its ATH in March, Rarible, the protocol, has made significant progress since then. Early in August, the team officially launched the Rarible Protocol, a set of open-source tools and infrastructure that will enable others to build on top of it. We think of it as lego blocks, like lazy minting or the royalty system, that could potentially create network effects around Rarible as others utilise Rarible's backend to significantly decrease their own time to market.
In addition to the interoperable tools that Rarible Protocol now offers, the team also introduced the application mining program. The program is "designed to distribute ownership of the protocol to NFT application builders." It is a departure from the previous model where RARI tokens were distributed to the marketplace buyers and sellers. Approximately 41,000 RARI, roughly ~$1.2m at the time of writing, are distributed weekly to apps building on the Rarible protocol, based on their weekly sales volume. Rarible.com, as one of the applications, will benefit from the app mining program and will continue to distribute its rewards to buyers and sellers.
We are also encouraged by the evolution of the Rarible DAO, with the recent approval of the compensation guidelines and the ongoing adoption of the working group model by the DAO, with several of them operational today, including Communications, Operations, and Developer Relations.
AUDIO was another strong performer this month, appreciating 111% on the back of some fundamental signs of adoption and its partnership with TikTok. When it comes to the fundamentals, Audius hit a few milestones in August. Some, like 15,000 Discord members or 500,000 track uploads, are relatively minor. Hitting 6 million monthly active users, however, is another thing entirely.
On the partnerships front, Audius partnered with TikTok as one of the launch partners for TikTok Sounds. The partnership will enable artists with songs on Audius to easily port them to TikTok, improving a process that currently just doesn't work. Around 75% of TikTok's monthly active users discover new music on the platform, so this integration could significantly increase exposure for artists on Audius and lead to potential revenue-generating opportunities.
It's also worth mentioning the integration with Phantom, a popular Solana wallet, that enables users to showcase NFTs they have on Solana. NFTs are becoming a crucial piece of the crypto cultural revolution, and integrating them could open up interesting social network-related opportunities for Audius in the future.
The ILV token also had a fantastic August, rocketing up 102%. The amount of ILV staked continued to rise through the month and now sits at over $550m (around 10% of supply). This drastically reduces on-market circulating supply, especially considering that ILC staking has a locking dynamic.
The project itself had many catalysts, including the confirmation that a land-based mini-game will also be developed for launch. As for the main game, new characters and in-game footage are being leaked almost daily, keeping excitement high. However, on recent podcast appearances, Kieran stated that the launch has now been pushed back to Q1 2022, and we have yet to see if this will dampen enthusiasm for the token. We wrote extensively about Illuvium in our latest research piece on MetaPortal if you want to catch up on the project in-depth.
Decentral Games started the month off strong, announcing new partnership venues with Bored Ape Yacht Club, Vegas City, and DEXtools. All three are a result of implementing the Node Package Manager (NPM) model, which allows partner venues to deploy DG games into their scene in Decentraland, with a portion of revenue going back to the DG DAO in return. When we wrote about DG back in June, one of the highlighted risks was the limited scalability of the DG model. By solely using casino venues in Decentraland, we felt the team might miss development elsewhere. NPM opens up new possibilities as the entire venue need not be game-related. Instead, as with DEXtools, the games can be integrated into a lounge area or similar. Further still, NPM is not just limited to Decentraland, which means the team can expand into other virtual worlds in the future.
For much of the rest of the month, the team delivered tweaks and updates to games and gameplay, the treasury grew steadily from $9.1m to $11.6m. The biggest news actually came at the start of September when DG's foray into play-to-earn was announced. In short, a new game type called ICE Poker is being introduced, and the team has designed it to enable players to earn ICE tokens from their poker skills. ICE poker is designed around a flywheel that leverages incentive design and NFT rarity to add another layer of gamification beyond the game of poker itself! The hope is that this creates 'player liquidity' poker and subsequently demand for the ICE token, but also that this spills over into other DG games, bringing more revenue to the treasury. If you're interested to learn more about ICE poker, we got you covered with this tweet thread:
Closing Thoughts
As we tend to, we wanted to highlight our deep dive on “Exploring Illuvium” as well as our podcast conversation with Kieran who is the co-founder of the project. Between these two, you should have all you need to get up to speed on one of the most exciting projects in the NFT gaming space.
Last week, we successfully rebalanced MVI in line with the methodology. There were no additions during the month, however, we did remove MEME due to poor liquidity and consistently low market capitalisation. For further details on the rebalance, check out "Metaverse Index - August Rebalance."