The token underpinning the Axie Infinity gaming ecosystem, AXS, posted a new 52-week low of $8.58 earlier today, according to data from Coingecko.
On a weekly note, AXS has lost nearly 22% of its value and is the biggest loser among the top 100 cryptocurrencies by market capitalization over the past seven days.
Last week wiped almost $200 million from the token’s market capitalization. As of this writing, AXS has a market capitalization of $890 million, down from $1.13 billion just seven days ago.
According to data from Coinglass, AXS futures positions totaling $5.1 million have been liquidated over the past week.
Of those liquidations, roughly 37% were short positions, with the rest coming from blown-out long positions.
The week’s bearish performance pushed AXS down 93.2% over the last year and 94.8% from its all-time high of $164.90 in November 2021.
The damage has worsened over the past month, with Coingecko indicating a drop of nearly 34.6%. The coin’s value has halved over the past 30 days.
After staging a modest recovery, AXS trades at around $8.62 as of this writing and is the 61st-largest cryptocurrency by market capitalization.
Unpacking the Axie Infinity downturn
Top cryptocurrencies, including Bitcoin and Ethereum, held their ground with modest weekly gains of 0.6% and 3%, respectively; AXS continues its negative correlation with the broader market momentum.
The primary driving force behind the downfall of AXS likely revolves around fears that private investors will sell their holdings following today’s scheduled unlock and distribution.
Axie’s private investors and advisors will receive nearly 21.543 million AXS tokens (7.979% of total supply) worth slightly above $185.7 million in less than 15 hours, according to data from Token Unlocks.
Axie Infinity raised $864,000 in a private sale of 10,800,000 $AXS in the middle of 2020.
The private Sale price is only $0.08.
Even if investors in the private sale dump $AXS at $10, they're still making 125x.
Of the 21.543 million AXS tokens, private investors are expected to receive 2.16 million AXS tokens, according to Axie’s Whitepaper. This will also be the final unlock, according to the COO of Axie Infinity and Sky Mavis COO Aleksander Leonard Larsen.
He added that Sky Mavis, the game studio behind Axie, “will not be selling a single token” of the upcoming unlock. The firm holds an advisory role.
These investors purchased AXS for $0.08 in 2020. If they sell today, they’ll lock in a hefty 10,650% win on the books.
Plummeting User Growth
Besides the token unlock, plummeting user growth has likely contributed to AXS’ bearish price action of late.
Per data from active players, Axie’s struggled to grow, with its player count dropping from 2.78 million during the start of the year to just above 701,447 today.
In the early stages of most crypto projects, tokens are allocated to investors and advisors but are not distributed during the launch.
Instead, they get vested and spread over time to reduce the token’s selling pressure.
The mechanism works under the assumption that during this vesting period, the market for the token should mature and that this large token unlocks will not affect the token’s price to a greater extent.
Unfortunately, that doesn’t appear to be the case for crypto’s favorite play-to-earn game Axie Infinity.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.
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