Metaverse Index Monthly Update - February 2022
MetaPortal Gaming Index, $GAME, is designed to provide exposure to the emergent crypto gaming space. Investing across games, virtual worlds and gaming platforms. The index is a simple and effective way to express the view that crypto games will capture a greater share of the burgeoning gaming market.
February was another tough month for the Metaverse Index, while BTC and ETH caught a bid despite and perhaps because of the geopolitical tensions. The Russian invasion of Ukraine and the subsequent sanctions served as a real-world example of why we need non-sovereign, decentralised money. Add in the Canadian government deciding to freeze bank accounts linked to the trucker protest without due process, and many people around the world are starting to wonder, “what exactly is money?” and “can my money be frozen on a moment’s notice by some government?”. Perhaps some are fleeing to the safety of BTC and ETH, with prices up 12.1% and 8.6%, respectively, in February.
The Metaverse was not the only theme that was down in February. The DeFi Pulse Index, providing exposure to DeFi, was down 13.5%, GMI or DeFi 2.0 index was down 15.9%, and the DATA index was down 8.9%, holding up a bit better than the rest. While MVI was down 10.5% over the month, it continued to outperform both majors since its inception in April 2021.
Stats and sats
Risk metrics remain essentially unchanged. MVI’s correlation to ETH and BTC is the same as last month, at 0.73 and 0.66 since inception. The MVI’s beta is currently at 1.10 for ETH and 1.31 for BTC. Net capture ratios remain positive, although they have been trending down over the last couple of months. For BTC, the net capture ratio is currently 29.5%, while for ETH, it’s sitting at 8%.
The number of unique addresses holding MVI on Ethereum grew by 3% in February, while addresses on Polygon grew by 8%. The Polygon bridge continued to lock up MVI, with its share of circulating supply increasing from 5.2% to 5.5% in February. Circulating units increased by 1.9%, with a total of 190,201 units circulating at the end of the month.
Trading volume continued to trend down, with a 28% decline in February, to an average daily volume of $0.43m. Total trading volume for the month was around $12m.
Performance of the underlying tokens in MVI was rather mixed in February, with SAND, ENJ, NFTX and AUDIO, to some extent, dragging the overall performance down. SAND, for instance, was down 22%. On the other hand, YGG and WAXE managed to outperform ETH, while DG and AXS have also held up rather well delivering positive returns.
There was a time in the early stages of NFT mania (H1 2021) when apps and games on Wax made up a substantial part of the top 10 NFT projects by sales volume, according to cryptoslam at least. We covered it in a deep dive back in May 2021. Strikingly, the screenshot we used at the time shows 3 Wax apps in the top ten, the highest 30d volume of which was Alien Worlds at $14m. The same stats now have the highest placed Wax app at #49, with Wax itself only 7th highest in total blockchain volume.
While Wax apps might not command the brand power of projects like BAYC or the funding levels of a chain like Flow, they have a well-established revenue share model, where WAXE stakers on Ethereum are rewarded with yield on a bi-monthly basis. The APR remains in the region of 10% and has stayed relatively consistent over time.
Even though Wax doesn’t currently have blockbuster games or NFT projects, they have maintained consistent interest through some core games (Alien worlds is still doing $1-2m monthly) and relevant IP, including Topps. With the proceeds of this activity making their way to long-term believers via the WAXE/ETH pool, the token price has found strong support. The token was up 9.4% in February and 104% since inclusion in MVI, showing some resilience in this market environment.
YGG was the strongest performer in the MVI, up 13.4% in February, as we saw the now-familiar deluge of partnership announcements and early-stage investments from the team. Picking through the latest report (Q4 2021, 2 months late!), the numbers continue to reflect strong growth for Yield Guild. They owned 62k Axies and supported over 10k scholars at the end of December. More recently, the team announced that it reached 20k scholars with another 7k scholars spread across YGG's regional subDAOs — YGG SEA (YGG Southeast Asia), IndiGG (YGG India), and OLA GG.
Economic changes in Axie Infinity (removal of daily quest and PvE earnings, for example) have had little impact on the price of SLP and Axies themselves, with YGG's revenue from the game continuing to decline. At the same time, YGG is invested so broadly that Axie is just one of many pillars at this point. Many of their early investments are up 10-20x before the related project has even launched, leaving plenty of room to run for assets on the balance sheet and diversifying risk away from the Axie economy.
Perhaps most interestingly, as the month came to a close, the team announced IndiGG, their regional subDAO focused purely on India. IndiGG has partnered with Polygon and recently FTX Gaming and follows YGGSEA as the first subDAO (focused on South-East Asia). What's impressive is that this subDAO alone raised $6m in a funding round back in January. It is set up to capture a portion of the 430m gamers reported to reside in the country, bringing grassroots adoption 'village by village' by extolling the virtues of play-to-earn games. We wrote about YGG not too long ago, covering the subDAO model. They haven't existed for long enough for an update of opinion. However, it still remains to be seen how incentives can be aligned between YGG and the subDAOs to create a positive-sum relationship.
DG was up around 5% in February as the team continued to steadily execute. There were several ICE wearables drops during the month, usually selling out in under 2 minutes. Some brought ETH into the Treasury (ICE Airlines Drop brought in $6m in ETH), and others burned ICE tokens (ICE Beach Club Drop removed 10m ICE from circulation). The team also airdropped xDG to the owners of ICE wearables and players using the delegated wearables to encourage more people to participate in governance. With 10,000 DAUs, $60m Treasury and around $300m FDV, Decentral Games has one of the most robust fundamentals in the space.
After three consecutive down months, including a nearly 44% drop in January, AXS price has stabilised, eking out a 3.4% gain this month. The team is getting close to its next major release, Axie Origin, and while no one quite knows what impact this will have, the excitement in the community is rather high. The release is coming at an opportune moment. DAUs have declined for 13 out of the last 16 weeks, falling from an all-time high of 2.7m to 1.6m. Perhaps Axie Origin, with free starter Axies and additional features like runes and charms, can supercharge the next leg of growth for Axie Infinity. The communication flow from Sky Mavis has also been much more consistent, with the team sharing more information around their thought process and progress.
Regarding economic adjustments, the team eliminated the Adventure Mode and the Daily Quest Rewards while also lowering SLP available in the PVP mode. At the same time, the number of players eligible for AXS rewards in Season 20 was increased to 300,000. In another recent change, the marketplace fee was increased from 4.25% to 5.25% to accommodate the addition of creator codes.
February was another busy month for us at MetaPortal. We launched the MetaPortal Gaming Index ($GAME) on Set Protocol, continued to publish the weekly gaming round-up and the Metaverse Inc. series, and wrote a lengthy research piece on the current state of crypto gaming.
As we've mentioned in our Discord, we are looking for someone to help us with content, specifically the distribution and growth. Unfortunately, we don't have much experience in this area, including social. If you do and you'd like to help, please get in touch.
Last but not least, there are no inclusions or removals for this month's rebalance. The rebalance itself went smoothly, with gas conditions being very favourable recently. We still froze RARI and REVV due to poor liquidity, even though neither position would've required too many trades to rebalance. As always, we continue to keep an eye out for new inclusions and are hopeful that we will be able to add new tokens in the upcoming months.