Viewpoint: Why are we not optimistic about pure Web3 game tokens?

Author: 1mpal Compiled by: Luffy, Foresight News I love Web3 games and have invested a large portion of my funds in game Non-Fungible Tokens and tokens. However, I am very pessimistic about pure game tokens. The market needs to normalize. Currently, I have no affection for those game projects that have completely lost their growth momentum since the TGE. If I were a trader, I would think that those who trade MEME coins or bet on the thriving artificial intelligence field are smart people. There is currently no reason to bet a huge amount of chips on game tokens, and the actual situation of the market is just like this. There are many reasons for this, but the main reason is that game tokens lack key factors to support the overvalued market valuation. 1. Game tokens are overvalued Very few Web3 games can match their market valuation. Even calculated by market capitalization rather than FDV, Web3 games are still overvalued. For example, CATIZEN is one of the most outstanding games recently, with a current market value of about $200 million, assuming an annual revenue of $20 million. To simply understand, you can compare tokens with stocks to assess their valuation. The South Korean game company Shift Up recently went public, with a market value of about $2.4 billion and an expected revenue of $140 million in 2023. The market believes it is overvalued because it has huge future potential. Nexon has a market value of $16.3 billion and an annual revenue of $3 billion. Krafton has a market value of $12.3 billion and an annual revenue of $1.5 billion. Take-Two Interactive has a market value of $26.3 billion and an annual revenue of $5.3 billion. For most major game companies, annual profits usually account for 10-20% of their market value. The token economics is built on the premise that the game will grow unconditionally. Still taking CATIZEN as an example, from the market value, this seems to be a very healthy project, but the problem lies in the unlocking mechanism. Mainstream game companies need financing to expand their scale, but the tokens of Web3 game projects are automatically unlocked. In fact, pure game projects without infrastructure are impossible to achieve growth. Except for special cases, most games have the highest number of users at the time of release, and then slowly decline, which is a very common situation. In other words, the idea of Web3 games self-appreciating is against market rules. 2. MEME coins are more attractive than game tokens The ability to find low-market-value gems in trading is a valuable talent, and the simplest and most reliable signal is trading volume. Low trading volume means that the market is not very interested, which naturally leads to a weakening of the upward momentum. Who wants to trade an industry that has been declining since its listing? Comparing the trend charts of NEIRO, CATI, and HMSTR on Binance, we can see obvious differences. Although CATI is clearly superior to traditional Web3 games in terms of game revenue and also clearly superior to HMSTR in terms of external social media revenue, its market performance is not ideal. On Binance, the trading volume of NEIRO is about 10 times that of CATI. Considering the current market sentiment and the willingness to list on exchanges, this is one of the worst times for game tokens to conduct TGE. Games are inevitably driven by venture capital, and projects that cannot compete in the current market will quickly exit through NFT sales, node sales, and TGE. Therefore, trading and holding MEME coins is better than game tokens. I believe that the three principles that determine stock prices are: expectations of the company's future value, the company's performance record, and fluctuations in market supply and demand. Currently, game tokens have no performance record, and supply exceeds demand, unless they have special marketing means, their future competitiveness as pure games is unreliable. Although comparing game tokens with stocks may not be entirely appropriate, it still has reference value. The key is which projects have the key to driving the market narrative. If a company's future value depends solely on its games, it will not survive. It needs infrastructure, it needs technological drivers. Or, unlock all the tokens from the beginning and let the market decide the price. Final thoughts I believe that the first quarter of 2025 will see a significant rise in cryptocurrencies. Like many others, I love Web3 games, but I think the FDV of pure Web3 game tokens needs to be lowered. Of course, if you have infrastructure or a technology moat (such as a game chain), you can get a higher valuation. But now, there are many games that, although highly valued, only serve the game itself. This may be the worst time for game projects, or it can be seen as a normalization process. This year I participated in several rounds of KOL financing for game projects, most of which were loss-making. The involvement of VCs has made the FDV higher and higher, and the token locking structure goes against the average law. However, some game projects will survive this process, and we hope to bet on those that can expand to platforms and infrastructure based on revenue. Remember, it is one or two giants that drive the market, and we are on the front line before traders, so we can prioritize selecting the protagonists. However, our weakness may be being too obsessed with the future of games. Even if we love games, we need to try to commercialize them.