AXS price risks deeper losses despite 90% drawdown already

Axie Infinity (AXS) has dropped by roughly 90% after peaking out at $172 in November 2021.

AXS’s sharp correction has made it one of the worst performing digital assets among the top-ranking cryptocurrencies. Moreover, it could undergo further declines in the coming months, according to a mix of technical and fundamental catalysts listed below.

Low player count dampens AXS demand

To recap, AXS serves as a settlement token within the Axie Infinity’s gaming ecosystem, allowing players to purchase native nonfungible tokens (NFT), a flurry of digital pets called “Axies.”

It also acts as a work token that players can spend to breed new Axies.

New users that enter the Axie Infinity ecosystem need Axies to pit them in a battle against other Axies. When they win, the platform rewards them with another native token, called Smooth Love Potion (SLP) while winning larger tournaments grants them AXS.

As a result, old Axie Infinity players rely on new ones to maintain demand for Axies.

Otherwise, they could risk old players selling their SLP and AXS earnings in marketplaces (for example, crypto exchanges), thus adding downside pressure to their rates.

But when the valuations of Axie Infinity’s native tokens drop, it also makes the game less appealing to new players, who would still need to pay for Axies to be able to earn lower-valued SLP and AXS units.

The Axie Infinity ecosystem has gone through the stages, as mentioned above, in 2022, with its player count dropping to 8,950 in June from 63,240 in January—an almost 85% decline, according to data provided by Dapp Radar. Interestingly, that coincides with AXS’s 80% price drop in the same period.

Simultaneously, Axie Infinity’s in-platform volume, measured after assessing its Ronin chain data, has dropped from $300 million in September 2021 to a mere $2.12 million in June 2022.

At the same time, the project’s top executives have quietly changed their “play-to-earn” mission statement to “play-and-earn,” with its new head of product, Philip La, admitting in his August 2021 post that “Axie Infinity first needs to be a game.”

Axie’s problem is that it’s always been a speculative tool wrapped in rhetoric about fun and community. The developers want it to go back to being just a game, when most players never saw it as a game in the first place. When the earning stops, the playing stops. 12/12

— Joshua…