The crypto market is currently feared for uncertainty and volatility, but one sector seems to be defying the odds—Metaverse tokens. While the Bitcoin market and altcoins are experiencing turbulence, Metaverse tokens are not just holding steady, they are surging. What’s behind this unexpected recovery? Let’s dive into the top reasons fuelling this development.
Crypto market in fear following FTX’s crypto selloff
Investors are preparing themselves for a potential cryptocurrency market downturn as FTX receives approval to liquidate its digital assets. Bitcoin and Solana are prominent on the distressed crypto exchange’s asset list. FTX sought permission from the U.S. Bankruptcy Court for the District of Delaware to sell, stake, and hedge its cryptocurrency holdings. Judge John Dorsey gave the nod on September 13, allowing FTX to offload up to $100 million in tokens each week.
FTX’s portfolio includes $1.16 billion in Solana (SOL), $560 million in Bitcoin (BTC), $192 million in Ethereum (ETH), and $137 million in Aptos (APT), among other assets. Despite concerns from FTX customers about the potential ripple effects of such a large-scale liquidation, including the risk of a crypto market crash and questions about FTX’s ownership of these assets, their objections were dismissed.
Contrary to expectations following the court’s decision, the cryptocurrency market has not entered a significant slump. In a surprising turn, major assets are experiencing modest weekly gains, effectively reversing the losses incurred over the past fortnight. Solana (SOL) has been especially buoyant, maintaining a steady climb since September 12. This upward movement appears to counterbalance the coin’s 23.55% drop over the previous month and may signal the onset of a bullish trend.
The possibility of SOL’s price reacting inversely to the news should not be discounted, especially considering FTX’s asset unlock schedule and the current state of the derivatives market. So far, the market has not felt considerable selling pressure due to the news. Similarly, Bitcoin has been enjoying an uptick since September 13, recently touching a high near $26,900.
Nonetheless, the market could face a downturn in the coming days due to FTX’s planned liquidation. The selloff is likely to inject more liquidity into the market, but with fewer buyers to meet the increased supply, this could result in a steep decline in asset prices.
Metaverse tokens are showing signs of increased upward volatility
In recent days, despite market volatility, metaverse-related tokens such as Axie Infinity (AXS), ApeCoin (APE), and The Sandbox (SAND) have experienced a strong surge.
One of the most compelling aspects of the Metaverse is the concept of virtual real estate. As physical spaces become increasingly expensive and limited, the digital market offers a new frontier for investment. Virtual land, buildings, and even entire cities are being bought and sold like hotcakes, and the tokens associated with these assets are skyrocketing in value.
Reasons for sudden surge
A variety of factors, including news updates, fundamental attributes, and technical indicators, have collectively fueled the dramatic rise in metaverse tokens. When it comes to news, there is a specific bullish catalyst that appears to be driving increased buying interest in these tokens.
This week, Animoca Brands, a major player in the crypto gaming and metaverse investment space, announced through one of its subsidiaries, Darewise Entertainment (also known as Life Beyond Studios), plans to introduce a pioneering metaverse ecosystem token on Bitcoin. This will be facilitated through the Ordinals protocol. The protocol allows for the creation of NFT-like assets on the blockchain and the issuance of BRC-20 tokens on Bitcoin, aiming to establish a comprehensive metaverse ecosystem centered around Bitcoin Ordinals.
This news was a solid catalyst in bringing a buying demand in the metaverse tokens and initiating a bullish rally. Now, let’s talk about some fundamental things that are contributing to the surge.
NFT Integration
Non-fungible tokens (NFTs) have taken the world by storm, and their integration into the Metaverse has created a symbiotic relationship that benefits both sectors. Whether it’s digital art, collectibles, or unique virtual experiences, NFTs within the Metaverse are creating new avenues for value and investment, driving up the demand for Metaverse tokens.
The Gaming Factor
The gaming industry is a multi-billion-dollar market, and its intersection with the Metaverse is a match made in heaven. Gamers are accustomed to virtual currencies and digital transactions, making them a natural audience for Metaverse tokens. As more gaming companies adopt Metaverse technologies, expect to see a corresponding rise in the value of these tokens.
Corporate Adoption
Major corporations are starting to take the Metaverse seriously. From Facebook’s rebranding to Meta Platforms Inc., to Nike acquiring virtual sneaker companies, the corporate world is signaling that the Metaverse is not just a fad but the future. This level of endorsement adds legitimacy and drives investment into Metaverse tokens.
FOMO: Fear of Missing Out
As Metaverse tokens continue to surge, a self-perpetuating cycle of Fear of Missing Out (FOMO) is driving more investors to jump on the bandwagon. Nobody wants to miss the next big thing, and right now, that big thing appears to be the Metaverse.
On-chain metrics for leading metaverse tokens
Axie Infinity (AXS)
The native cryptocurrency of Axie Infinity, AXS, witnessed a rapid ascent, surging over 20% within mere minutes on 14 September. The price leaped from $4.22 to $5.1 in just an hour, marking a nearly 22% gain. Although some of the gains have since receded, AXS remains up by 2.1% over the past seven days, trading at $4.5 at the time of writing.
No major announcements or upgrades from AXS’s official channels have been identified as the catalyst for this price spike, suggesting that the surge may be technically driven. One plausible explanation could be an unexpected short squeeze, characterized by a quick price increase mainly due to excessive short selling rather than fundamental factors.
This theory is supported by the fact that the abrupt price movement led to a significant amount of short-position liquidations. On 14 September, $2.42 million worth of Axie Infinity positions were liquidated, with short positions making up the larger portion at $1.4 million.
The sudden price change also spurred a massive uptick in trading volumes as traders flocked to the market to capitalize on the gains. AXS’s trading volume soared by 300% in the, with over $100 million changing hands.
Examining the on-chain metrics, there’s been a significant increase in the number of large transactions, soaring from 2 to 14 and 12 on September 14 and 15, respectively. This indicates substantial activity among AXS whales, contributing to a rapid price surge. Furthermore, the volume of large transactions has escalated to $13 million over the past three days, acting as a driving force to sustain the price momentum.
According to data from IntoTheBlock, the active address count has also experienced a notable rise, climbing from 244 to 437. Concurrently, the number of newly created addresses has leaped from 73 to 140. These metrics suggest an influx of investors participating in and fueling the bullish trend by accumulating AXS tokens.
The Sandbox (SAND)
Over the last three days, the SAND token witnessed a liquidation of over $100K worth of short positions, which has been a significant factor in contributing to the recent price rally. The SAND token has experienced a surge of over 10% following overall bullish sentiment in the metaverse sector. The token has jumped from the low of $0.28 to $0.31, forcing buyers to go long on the token.
The rising fascination with Sandbox is the result of a blend of elements. Trading activity has skyrocketed, reflecting a positive market outlook. Moreover, recurring ‘ascending triangle’ formations in the chart indicate a sustained upward trajectory. Simultaneously, despite the upward price swings, the Relative Strength Index (RSI) has stayed under 70, implying that the token is not in overbought territory.
Examining the situation from an on-chain perspective, the volatility of the SAND token experienced a significant spike, exceeding 50%. This surge contributed to a wave of bullish enthusiasm among traders. However, the volatility has since receded to around 40% following the initial price pump, signaling a substantial shift in market sentiment.
In addition to changes in volatility, the average transaction size has also seen a notable increase. This uptick suggests a growing trend of accumulation in the market, as traders appear to be buying and holding more of the token. Specifically, the average transaction size has soared to a high range between $7,000 and $8,000, further reinforcing the bullish sentiment that seems to be pervading the market.
Moreover, there’s a surge in large transactions as it spiked to 12 within a single day. All these metrics became a driving force behind the notable surge in the Sandbox and several metaverse tokens within the last few days.
Conclusion
While market turmoil usually spells bad news for investments, Metaverse tokens are bucking the trend and showing a remarkable surge. From the allure of virtual real estate to corporate adoption and on-chain data, multiple factors are contributing to this surge.
While some tokens are capturing headlines, others are making consistent gains under the radar. Decentraland (MANA), a platform that allows for the creation and interaction with 3D content in a decentralized manner, has seen an 11% growth over the last seven days.
Theta Network, Render, and Stacks are also on an upward trajectory, posting maximum weekly gains of 6.8%, 7%, and 2%, respectively. Meanwhile, emerging tokens like Vulcan Forged PYR and Enjin Coin (ENJ) are making their presence felt with maximum weekly increases of 6% and 4%, respectively.
