The metaverse is cooling fast, at least as far as the cryptocurrency world is concerned.
Today, the cryptocurrency market is flashing red, with most of the major tokens trending lower in early afternoon trading. However, as of 12:15 pm, popular metaverse cryptocurrencies are seeing even more dramatic dips than theirs. quotations.
Enjin Coin, Axie Infinity, Decentraland and The Sandbox all fell 11,7%, 9,8%, 8,7% and 8% respectively in the last 24 hours. These moves significantly outpaced the general market, which still fell 6% in this time frame.
Much of this decline appears to continue to stem from Ronin's high-profile hack, the Axie Infinity bridge built by Sky Mavis, the company behind the project. Bridges are integral to the proper functioning of the play-to-earn blockchain gaming space, and trust between key platforms has been hurt by this hack.
Furthermore, concerns around a recent metaverse fund launched by HSBC for private clients in Hong Kong and Singapore seem to have created quite a stir in the metaverse community. This fund's core holdings have yet to be revealed, leading investors to remain unclear on which specific cryptocurrencies to consider in this growing space.
Most risk assets are down today as interest rates continue to rise ahead of the upcoming Federal Reserve meeting. With money becoming more expensive, the amount of capital that can be allocated to high-growth market areas, such as the crypto metaverse, is discounted.
The lowest valuations across the board aren't good for investors in any asset class. However, for metaverse-related tokens like The Sandbox, Axie Infinity, Decentraland, and Enjin Coin, these concerns are exacerbated by a series of industry-specific headwinds. How this sector will continue to grow, given concerns about bridges and investment opacity, remains to be seen.
There is certainly a lot to like about where the metaverse might be headed, from a growth perspective. Cryptocurrency investors have seen initial capital compounded at an incredible rate until last year, with less impressive gains in 2022.
Whether this sector can rebound depends on a number of factors. There are clear "plumbing" problems with bridges that need to be addressed. This is perhaps the key factor that worries investors right now.
As a result, this space may continue to be volatile for some time, until the positive sentiment returns. Until then, I intend to quietly stay on the sidelines with these tokens.