Bulls and bears – the ups and downs of financial markets
For many, the 2022 crypto market has been little short of a disaster. So far, even with the recovery in 2023, the market has shed about $1 trillion after the last Bitcoin all-time high.
The overall mood on the crypto market has progressively worsened in the last few months as investors haven’t really been up to giving away money under such conditions. The losing interest in the crypto market, exacerbated by scandals such as FTX’s bankruptcy, is only predicted to extend the crypto bear market. The damage done to investors’ confidence and the negative market sentiment is evident in the continuous fall of crypto price, and the diminished ability of crypto to raise funds – blockchain gaming included.
The explanation for crypto hardships can be found in good old traditional finance. First, we had a bull market. In simple words, a bull market is a period of time in financial markets when the price of an asset or security rises progressively. Everyone benefits from bull runs. However, taking into account that it is not in the nature of any market to keep a positive balance eternally, markets are constantly in flux. Hence, nobody knows for how long the bull is going to run.
Needless to say, the bull stopped running last year and though unpleasant, bear markets are part of the natural market cycle, and more importantly, they are not crypto-specific occurrences. Certainly not gaming-specific.
All financial markets have their bear phases, and crypto isn’t an exception to the general rule. A bear market can be defined as a phase when a particular market experiences prolonged price declines referring to a condition in which prices of assets and/or securities fall 20% or more. Contrasted to the upward-trending bull markets, bear markets may be associated with economic downturns in general such as recession, wars, pandemics and similar hardships. Sound familiar?
Can the bear maul blockchain gaming?
The bear market got its name from the manner in which a bear attacks its prey, namely swiping its paws downward as opposed to a bull attacking with its horns in the air. Typically, the bear market encompasses four possible phases starting with the first phase associated with investors turning away from a particular market.
Sounds like this is happening to the crypto world right now. Market cycles last approximately four years, but there is no general consensus on their length.
The curious thing about crypto observers is many continue to overlook how extenuating circumstances outside of crypto are really what’s at play here. The World Bank insists a global recession is deepening. Banks all over the world are raising interest rates. Inflation is sky high globally…Why should crypto be exempt?
The media only plays its part, transferring sentiment from the top down to society, paying as much due to the bear as to the bull.
On the other hand, why are people like billionaire Mark Cuban and Ethereum co-creator Vitalik Buterin gladly welcoming this market cycle? Why are they saying that bear sentiment benefits the market’s health?
Crypto gaming and the bear market: level up Instead of game over
Crypto gaming has been successfully defying the bear market cycle according to Dapp Radar’s exclusive report. Even though funding is down around minus 48% quarter on quarter, that is not really a surprise considering all circumstances and market conditions. In fact, despite all the despair in crypto, blockchain gaming deals in 2022 outperformed the 2021 totals.
In 2022, venture capital investment in NFT and blockchain gaming reached $3.4 billion, showing continued growth and interest in the industry.
It seems as if blockchain gaming is a true survivor and a vertical keeping the pace up for the entire crypto industry in the midst of the bear cycle. Dapp Radar’s report in cooperation with BGA provided some numbers that speak on the behalf of the blockchain gaming industry in 2022.
Apart from the fact that particular games have been going strong throughout the year outperforming the bear cycle and crypto winter, Web3 and metaverse projects managed to raise an additional $1.4 billion in investments. Moreover, most Play-2-Earn (P2E) games are witnessing a progressive increase in their daily base of active users while others have managed to retain their user base. These numbers merely indicate that the return on initial investments is good, and that the crypto gaming industry is living up to its promise.
As many noted in the last crypto winter, the successful projects have always been the ones to use the bear period as a time to build and launch new products and innovations. This can only be truer in the blockchain gaming industry, which has demonstrated that it is a resilient industry with massive growth potential that cannot be bothered by external conditions on the market.
As the crypto market continues to fluctuate, it’s crucial for blockchain-based gaming projects to differentiate themselves in order to survive. While copycat games and titles with flawed token models may not sustain the test of time, innovative and well-thought-out projects are poised to thrive in the long-term.
As the industry evolves, it’s important for players to keep an eye out for those ventures that bring something truly unique to the table.