Mid Year Gaming Review

Introduction

After a strong end of 2023, the first three quarters of this year have been full of ups and downs for Web3 gaming. Projects like Big Time and Shrapnel kick-started the hype cycle in Q4 2023 and were quickly followed by a series of strong launches in Q1 2024. Pixels and Portal, in particular, stood out for launching tokens at an FDV over $2.5B, arguably leaving many feeling sidelined and igniting optimism across the Web3 gaming sector.

However, the market eventually got saturated with teams rushing out of stealth to capitalize on the trend. By Q2, the relative lack of liquidity and turbulent macro conditions shifted sentiment and resulted in a number of disappointing launches. Considering the weakening state of the market around May 2024, it is not surprising that investors became more risk-averse and developed a preference for playable products and fundamentally driven investments.

Enter TON, arguably this year’s biggest winner, which took the market by storm with its promise to distribute apps across its user base of 900M telegram users with frictionless access to its ecosystem. While a ton of speculation still surrounds the TON ecosystem and its future launches (pun intended), it helped remind investors that applications can leverage blockchain incentives and viral flywheel effects to onboard real users. Furthermore, the Notcoin hype led to an encouraging trend of actual games – as opposed to questing-only platforms – being more prominent in gaming pre-TGE campaigns.

Even though the current total gaming market capitalization, as reported by Coinmarketcap, sits at only $15B – about 33% less than what it was on January 1st, 2024 – we see the current state of the market as an opportunity rather than a setback. Gaming remains one of the clearest paths to onboarding hundreds of millions of users into Web3. Funding relative to Web2 gaming remains strong, infrastructure is maturing, experienced teams are getting closer to launch, and big industry leaders like Sony are entering the space.

Web3 Gaming vs Other Sectors

Compared to the broader crypto altcoin market, gaming has been underperforming since January 2024. After leading the charge from mid-October to late December 2023, the total crypto gaming market cap settled around $20B around the new year, gaining over 175% in 10 weeks, driven by many studios’ promise to finally release playable games. About eight and a half months later, the total crypto gaming market cap has declined by around 33%, a sharper decline than the 14% decrease in total altcoin market cap we saw over the same timeframe.

The main drivers for this gap between gaming and the rest can be traced back to a select few winners, mainly Memes, AI, and the Solana Ecosystem.

However, compared to other high potential sectors like RWA or DePIN, gaming holds up its own and follows a very similar pattern.

According to Dappradar, Web3 gaming leads the industry and accounted for 30% of total dApp activity with its 2.1M daily active wallets by April 2024. In terms of users, TON has been leading the charge with single games like Notcoin (40M+ users) and Hamster Kombat (300M+ users), which are rivaling or even surpassing entire blockchains. Similarly, the Apex chain, built to support the Pirate Nation ecosystem, stands out as one of the most active chains,