Blockchain Gaming Investment Fund: the DeFi Blues
This article was written by Andrew Wagner, the founder of www.blockchaingaming.com
It’s been hard times for the blockchain gaming market. We were off to a good start, as documented in our first blog post about the Blockchain Gaming Investment Fund; losses to MANA and MATIC were offset by a huge CHI bull run. The price of CHI has since retracted, however, and MANA and MATIC have continued to falter thanks partially to falling BTC/ETH prices.
The DeFi Blues
The main cause of contraction in the blockchain gaming market, however, has been the DeFi explosion. For those unaware, DeFi stands for decentralized finance, which involves financial instruments and services on the blockchain such as peer-to-peer loans, autonomous interest-bearing accounts, and stablecoins. These pull investor excitement away from blockchain gaming, and stablecoins also make it easier (and thus more likely) for nervous traders to retreat to neutral positions.
Other altcoins of various types have also suffered, however, suggesting this is not a particular weakness in blockchain gaming. Furthermore, this appears to be an unsustainable hype cycle similar to the ICO fad. Tokens have risen thousands of percentage points and collapsed to zero in short amounts of time, and arguments have emerged about how to protect the community from scammers.
Like ICOs, DeFi is an amazing innovation and here to stay. The buzzword will eventually lose its luster, however, becoming just another category of blockchain application. A crash and negative press cycle is likely to result from the proliferation of predatory behavior; many hype-driven investors will thereafter return to blockchain gaming if developers succeed in publishing working games of high quality.
New Acquisitions
Despite the aforementioned setbacks, a couple close friends decided to invest money in the Fund. Since prices are down all around, we doubled down on our previous picks, but we also made some new ones.
EnjinCoin will seem to many people like an obvious choice, having long been dominant on the blockchain gaming scene. They had a large existing community of Minecraft players, and the ERC-1155 token standard they invented is widely acclaimed. They basically make it easy to put in-game items on the blockchain, and provide an ecosystem in which to use them.
I think what drives their success now, however, is the network effect and trust in their brand. Lots of games use their platform, and we’re going to see some of them on mainstream consoles in the coming years. They will probably be the first blockchain gaming platform to truly reach the mainstream.
GeoCoin might come as more of a surprise to those outside the community around UBIQ, their chosen blockchain. A small market cap means room for growth, however, and as a personal friend of the developer, I know he is extremely honest and unlikely to disappear. That’s important when we’re holding bags of his coins.
More importantly, though, positive changes are coming to GeoCoin. I have confirmation that they are working on adding NFTs, the most valuable acronym in the blockchain gaming industry. In addition to being a buzzword, it also combines well with geocaching: players could travel the physical world in search of virtual creations, much like Pokémon Go. We all remember how popular that was, and it still has loyal fans, today.
Future Projections
The reason we have a higher percentage of the Fund in MANA is because I’m guessing that interesting things will happen there first. Look at the featured chart:
The price broke hard through the upward trendline and hasn’t fallen through it since. Falling trend lines have prevented the price from growing much further, however. We can assume that trading bots have been buying at the bottom and selling at the top, but their profit margins decrease as the lines converge, which looks poised to happen within a month. Either the upward or the downward trend will have to overpower the other one. Obviously, we are hoping the bulls win.
We have some reason to believe they’re likely to do so. Nothing but good news is in Decentraland’s immediate future. Voice chat is on the horizon; wearable NFTs are coming soon; funding is being released by the DAO, and various contests are anticipated. Ethereum 2.0 is probably also coming, despite what critics think, and that means transaction fees are going back down.
An unclogged blockchain isn’t such great news for MATIC, though, who offer enhanced scalability. It’s possible that Ethereum 2.0 causes some investors to lose interest, and it will be a while before enough new users enter Ethereum to drive fees back up again. They will, though, in a scaling cycle that could repeat itself many times over the years, and MATIC will continue to be useful for cross-chain interoperability. The second chart shown here provides estimates for when something interesting might happen, again using converging trendlines. Meanwhile, those of you who like to day trade can use them to calculate where to buy and sell. Just be careful — the next run can always happen early.
