According to a new report from ChainPlay, 93% of Web3 GameFi projects are dead. The firm analyzed 3,279 projects and determined that the average application value has dropped 95% from its all-time high.
None of the industry’s various subdivisions have significantly broken from this overwhelming downward pressure, but some venture capital firms have managed to make profitable investments.
GameFi in free fall
ChainPlay posted this grim analysis of the GameFi industry on their blog this week. Basically, the peak of GameFi funding and enthusiasm occurred in 2022, but most of the companies turned out to be completely unsustainable. Even this year’s highly publicized airdrops have not stopped this sharp decline.
These statistics are so damning that the report does not claim that any area is showing healthier returns.
For example, some industry commentators have proposed that Tap-to-Earn games are the future of GameFi investing. Cloud gaming is also growing, and Aethir recently created a $100 million fund for its development. None of these, however, counteract the downward trend.
However, ChainPlay was very clear that there are profitable returns. Retail investors made an average profit of 15% and the report states that “the aspiration of achieving financial success with GameFi has transformed into a terrifying reality” for these small users. Institutional investors, however, achieved much higher returns.
“For venture capitalists (VCs), returns are much more polarized. Average returns for venture capitalists are 66%, suggesting that strategic bets can pay off despite broader market headwinds. The top performers are also top-tier sponsors of the crypto market. This suggests that careful investments in venture capital can still generate profits,” ChainPlay said.
However, the top-performing VC firm was FTX’s controversial spinoff, Alameda Research, which earned a 713.15% ROI on its investments. Considering the massive fraud in which Alameda was involved, its GameFi strategies are hardly a replicable model.
In total, GameFi investments in 2024 are down more than 84% from their peak in 2022. Venture capital firms are still making strategic bets on certain projects, and these can generate useful returns. However, for the individual user, “volatility that once promised immense upside potential has now proven to be a double-edged sword,” and earnings results are dismal.
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