New Opportunities in the Gaming Finance Sector: Analyzing the Dynamics of the Encryption Game Market

Against the backdrop of Bitcoin climbing from $25,000 to $40,000, the GameFi ( sector has experienced significant growth, driven by the launch of multiple projects and upcoming releases.

Overview

In recent years, the gaming industry has undergone significant transformations. The emergence of GameFi integrates gaming with decentralized finance )DeFi(, a fusion powered by non-fungible tokens )NFTs( and blockchain technology. GameFi not only redefines the gaming landscape but also incorporates financial elements into the gaming experience, thereby establishing an economic model for games.

In the last bull market, some eye-catching "play-to-earn" ) P2E ( games stood out. Strictly speaking, these games did not offer an exceptional user experience; their rise was mainly attributed to the enthusiasm for the concept. However, after experiencing the recent bear market, many game projects that were launched during that period have undergone substantial long-term development. This also means that 2024 will witness the release of a large number of high-quality Web3 games.

In addition, the latest data shows that interest and growth in the gaming sector are recovering. Our analysis predicts that this positive momentum is expected to continue in the upcoming bull market.

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Overall Performance of the GameFi Market

Despite unfavorable market conditions, there was significant growth in the network for Web3 games in 2023. Particularly since October, with the recovery of the encryption industry, the Web3 gaming sector has experienced strong growth. According to data from the data platform, as of December 3, 2023, the market capitalization of GameFi tokens has reached $7 billion, doubling from the end of 2022.

Throughout 2023, the market value of GameFi tokens showed a strong correlation with Bitcoin. Notably, during fluctuations in Bitcoin's market value, GameFi tokens exhibited even more pronounced volatility. This indicates that GameFi projects inherently carry higher risks and are more susceptible to fluctuations in funding, especially during market downturns.

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Currently, the Web3 gaming sector is thriving, with approximately 2,700 active game projects and a market value of 7 billion USD as of December 3rd. However, despite the considerable market value, challenges in user acquisition and retention still exist. Notably, games with over 1,000 monthly active users still account for a small proportion of the total number of games, about 9%, highlighting the difficulties that Web3 game developers face in attracting and retaining users.

Through on-chain analysis of the first ten months of 2023, it was found that the daily active users of Web3 games remained around 1 million. Subsequently, the number of active users showed an upward trend and maintained a high level in the fourth quarter.

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Performance of GameFi on Various Chains

As of December 3, 2023, the distribution of games across various blockchains shows a stable trend, with the BNB chain leading at 29.6%, followed by Ethereum at 23.7%, and Polygon at 14.7%. However, there is a significant gap between these top three chains and the second-tier blockchains such as Wax and EOS, which account for 5.0% and 2.1%, respectively.

Since 2022, the distribution pattern of games across various blockchains has remained consistent. With the booming Web3 gaming market, it is expected that more chains will emerge, potentially challenging the dominance of the top three chains.

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GameFi Investment and Financing

According to analysis from data platforms, a brand new encryption gaming market has emerged, aimed at empowering players through true ownership of in-game assets, with a valuation exceeding $27 billion at the beginning of 2022. Despite experiencing a decline of over 85% by the end of 2022, the value proposition of blockchain games has not escaped investors' attention. Venture capital funding surged from $3.8 billion in 2021 to $5.4 billion in 2022 (specifically for the Web3 gaming sector), despite the unfavorable macroeconomic conditions.

According to data from the data platform, Web3 game projects raised a total of $2.3 billion in funding from the first quarter to the third quarter of 2023. Although this is slightly lower than the 50% funding raised the previous year, these numbers must be considered in the context of the unique market dynamics of 2023.

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In addition, the active development of GameFi concentrated in November, with some projects such as Pixels, Illuvium, and Gala Games releasing impressive announcements. Moreover, the involvement of traditional gaming giants like Ubisoft has raised user expectations for the playability of blockchain games. With the enhancement of gaming experiences and the lowering of user entry barriers, it is expected to attract more capital and users into this field in the future.

It is worth mentioning that we often reiterate that investments made in the previous year are expected to yield returns in the current year and may extend into the next year. Notably, in the fourth quarter of 2023, we had the privilege of witnessing the preview and beta of the highly anticipated Web3 games. Therefore, launching the GameFi quarter has become a strategic decision aimed at enhancing enthusiasm and unleashing the potential of this field.

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The Prospects and Expectations of GameFi

During the previous GameFi summer, major investment institutions paid close attention to the gaming sector. However, due to the increased complexity of gameplay, heavy development tasks, and relatively long production cycles compared to other applications, coupled with the unfavorable timing of launching projects during a bear market, significant challenges were encountered.

With the improvement of the encryption market environment and the dynamic rotation of sectors shaping the current bull market trend, GameFi has once again attracted attention. It is noteworthy that some well-known entities have launched new games (such as GasHero), established blockchain gaming platforms (such as Ronin), and emerging game titles (such as Bigtime) have emerged during this wave of enthusiasm.

In terms of project cycles, the Web3 games that secured funding during the previous GameFi summer are now entering the final stages of game production, with funding expenditure nearing completion. Combined with the overall improvement in the macroeconomic situation, a large number of high-quality games will inevitably be pushed to the market within the next year.

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Conclusion

It is well known that the potential of games to attract millions of new users into Web3 is not to be underestimated. Based on the current on-chain data related to the revival of GameFi, it is reasonable to expect that this positive momentum in the GameFi sector will continue throughout 2024. Game tokens are likely to become one of the biggest winners in the upcoming bull market.

Despite the new opportunities in GameFi, it still faces numerous challenges, such as user experience, token economics, and security regulation. Observing the GameFi sector, there has not yet been a single game that has successfully navigated the bull and bear markets, ensuring long-term stable operations. Therefore, effective investment strategies remain essential.

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