🧘‍♂️ALERT: $9 Billion Opportunity

Market Meditations | March 16, 2022

Dear Meditators

In the first week of our NFT index series, we explored the largest sector of the NFT market with a total market cap of $9bn; social NFTs.

This week we are going to dive into a sector that is looking to make an impact on a $200bn dollar industry – gaming.

Today’s Meditations:

NFT Gaming with Nansen
Mystery Crypto Puzzle Prize
A Brief History of DeFi

⏰ Top Headlines

? I Want to Play a Game

Gaming NFTs are those that relate to online gaming. Thus far, gaming studios have owned the rights to all in-game assets (weapons/items), often prohibiting secondary markets. This sector is looking to alter that dynamic, giving players true ownership of their in-game items and enabling players to earn profits.

Nansen uses its data to sort Gaming NFTs by market cap, including the top 50 in the index so we can understand how the sector is performing, and spot the hottest projects.

Performance over 30 days

Nansen.ai: 16/03/2022 – NSN-GAME50 30 day performance

Gaming NFTs have fallen 26% in USD terms within the last 30 days.
The index has bounced back but this bounce was weaker than the wider NFT market, continuing the sector’s trend of underperformance.
One explanation for this performance is the lag between the release of gaming NFT collections and the games themselves. Whilst there is an initial hype, it is difficult to build on this without a real product behind the project.

Breakdown of Sub-Sectors

Nansen.ai: 09/03/2022 – NSN-Game50 Market Cap By Category

The total market capitalization of Gaming NFTs is 368k Eth or $987m.
There are three key sectors that share a large proportion of the gaming NFT market, with each offering its own profit opportunities:

(1) Play to Earn: where gameplay objectives are rewarded with tokens.

(2) Role-play: where players take on the role of fictional characters. NFTs can represent characters and items which have value driven by their characteristics.

(3) Game-Fi: A mixture of DeFi and gaming where decentralized applications offer economic incentives in a gamified manner. The key here is understanding the mechanics of the game.

Largest Projects

Nansen.ai: 09/03/2022 – NSN-GAME50 Index Activity (sorted by Market Cap)

Currently, the largest NFT gaming collection by market cap is ASM Aifa All-Stars, where NFTs can be used to assemble a team of football players.
The low 24-hour volume indicates the sector may suffer from liquidity issues.

Tip: We can dive deeper into individual collections to find recent price movements and check whether any smart money is involved with the project.

Conclusion

The gaming industry has grown incredibly quickly in recent years, and the integration of NFTs allow users to start owning their assets, making real profits from gameplay. Whilst a lag between the release of gaming NFT collections and gameplay has impacted the market over the last 30 days, this asset class will likely grow exponentially upon the release of the top-performing games.

? Puzzle In Plain Sight

Recently, NFT collector Andrew Badr, discovered an NFT that contained a mysterious hidden puzzle with a prize that had been dormant for over a year. The puzzle was actually part of Larva Labs Meebit collection, but since it went unsolved, they decided to add another layer.

Last month Proof.xyz released the Grails NFT drop, containing 20 artworks by 20 anonymous artists. Members of proof were able to pick any piece to mint and after all the mints were gone, the anonymous artists were revealed.
After minting closed, the Proof team revealed that Grails #11 was created by Larva Labs as a prototype of their Autoglyphs project.
On the night of the reveal, ’Iceman’ posted a picture of Grails #11 and a question in the Proof collective chat. Enlarging the edge of the picture, revealed a series of L’s and he couldn’t help but wonder if that was a coincidence or not.
The L’s turned out not to be a coincidence at all, they were actually a hidden message. Being intrigued by their placement, Badr wrote a script trying to decode the images with ASCII, a character coding standard for electronic communication.
Finally, a message was revealed: SECRET IS IN THE PIG NUMBERS, LL. This message coming from Larva Labs led Badr and friends to the Meebits collection.
After sifting through the collection and trying various methods for decoding, they discovered that some of the pig Meebits had jersey numbers. Many failed attempts later, they had a breakthrough. Linking the 64 jersey numbers into a hex string, which they then interpreted as an Ethereum private key, led them to .025 Eth and Meebit # 2858.

If you would like to read more about Andrew’s experience solving the Larva Labs NFT puzzle, you can follow his Twitter account.

? DeFi’s Belief

If you were in the space two years ago you may have witnessed the heralding of a new dawn, where the DeFi knight galloped into the kingdom on an armoured unicorn and commandeered a rocket to the moon. Is he still going strong?

DeFi summer kicked off in 2020 when Compound introduced its governance token to reward users for liquidity mining, followed closely by hundreds of imitators.
Devoted followers poured in, and the arrival of yield aggregators like Yearn Finance helped raise the Total Volume Locked (TVL) from $500 million to $250 billion in 18 months.
However, many meme tokens also started to appear with little to no utility value and the novelty bubble popped. Despite the TVL continuing its upwards trend, the dominance of DeFi has been dropping for almost a year.
When crypto is used as collateral, market crashes accelerate losses in a vicious circle, as margin calls execute and people close out traditional stock options to cover.
To compound these concerns, there have been many hacks of protocols, the latest of which was Agave and Hundred Finance.
A hacker made off with $11 million in wrapped tokens yesterday after executing a ‘re-entrancy’ attack, where they continue to borrow before the protocol works out that the collateral has already been used.

Despite these setbacks, DeFi stalwarts are convinced these are all teething problems for what ‘should’ become part of the future of finance, but how many assets will be stranded during a bear market is yet to be seen.

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Twitter

JUST IN: HSBC ($3 trillion in assets) is the first major bank to enter the Sandbox metaverse – Blockworks
“#Binance has been granted a license to operate in Dubai, days after getting approval in Bahrain, further bolstering its presence in the Middle East.” – CZ Binance
Macro Thoughts: Interesting to see that High Yield is now pricing in ISM at 46 (recession). Im really not sure how the Fed can do anything but a small hike or two to appease the politicians as the economy is going to slow fast… 1/ (Thread) – Raoul Pal
JUST IN South Korea’s new president vows to introduce favorable Bitcoin and crypto tax laws – Bitcoin Magazine

Next week will dive into the NFT sector looking to enter an asset class that has historically acted as a strong store of value: art.

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??‍♂️✍️ Stories in this newsletter were written by D. Beverly, Isambard FA, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Ellen B.

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