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Wednesday, August 10, 2022

Why Metaverse Cryptos Axie Infinity, Decentraland, and Enjin Coin Plunged 20%+ Today

What happened

Top metaverse cryptocurrencies Axie Infinity (CRYPTO:AXS)Decentraland (CRYPTO:MANA), and Enjin Coin (CRYPTO:ENJ) were once among the hottest tokens in the crypto world. Today, that positive momentum has run straight into a brick wall, with each of these tokens plunging more than 20%. As of 10:15 a.m. ET, these three tokens lost 20.8%, 20.1%, and 21.1%, respectively.

This sell-off is a continuation of what we saw unfold on Friday. Most metaverse-themed cryptocurrencies declined by more than 10%. However, an acceleration of these declines into the weekend is never a good thing.

The market appears to continue to be pricing in a bearish near-term outlook. Rising interest rates, inflation concerns, central bank digital currency issues rank among the top negative catalysts.

Image source: Getty Images.

So what

Crypto markets are active 24/7, 365 — a great thing for those who like consistent market action. However, during aggressive market sell-offs, perhaps some investors wish the market would just close for a few days.

Like many high-flying tech stocks (metaverse-related or not), Axie Infinity, Decentraland, and Enjin Coin really have investors scratching their heads. On the one hand, the growth thesis with these assets is very easy to understand, as the metaverse concept promises to disrupt many large markets. Those looking a few years, or even a few decades, down the road may see no reason to sell on near-term headwinds, and hold on for the very long-term. 

On the other hand, these metaverse cryptos have skyrocketed over the past year. With the market rerating the risk associated with the entire crypto sector, it’s unsurprising to see these tokens get hit hard as well.

Now what

Looking forward, investors thinking about buying this dip ought to consider how much downside potential could possibly be left. Is it really possible that many of these high-flying tokens from 2021 could see most of their gains evaporate this year? Or will buying pressure eventually materialize to form a base of support from which these tokens can continue higher?

Right now, the outlook for even the most attractive and shiny metaverse cryptos is very uncertain. Nevertheless, this sell-off is remarkable, and while we’ve seen other days in the past where most tokens declined by double-digit margins on a given day, seeing so many quality tokens decline by 20% or more is certainly not an average day.

Volatility is expected in the crypto world, but today’s price action in the crypto market is really extreme. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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