Crypto Crash Strikes Fear in Future of Play-to-Earn Gaming Economy

Despite being dubbed the future of gaming by some, P2E games faced a tough week.

Dominic Lumabi, on Manila, Philippines, plays “Axie Infinity” at home for work in December 2021 (Photo by JAM STA ROSA/AFP via Getty Images)

The cryptocurrency bubble is popping, and the play-to-earn gaming market is along for the ride.

It’s been a volatile week for crypto, as Bitcoin—considered the most stable of the coins—dropped by more than $10,000, losing about one-third of its value in a week. Ethereum, the crypto token that many NFT projects run off of, is down, too, falling from nearly $3,000 per token on May 4 to as low as just over $1,800 on May 12. 

Coins that are backing the play-to-earn games are taking the hit, too—with Polygon token dropping from $1 to $0.50, the Axie Infinity token dropping from roughly $30 to $20, and Smooth Love Potion token, used as another currency in the highly-popular, “Pokémon”-like, “Axie Infinity” game, falling below 1 cent for the first time. 

Before we dive deeper here, it’s important to explain play-to-earn (P2E) games, how they work, and why they're important, as I’m not sure everyone keeps up with it as much as they do esports and streaming. 

At their core, P2E games incentivize players by linking play time and effort to potential rewards—collectible items, often some form of non-fungible token (NFT), that are linked to a cryptocurrency and can be resold for real-world money. Through playing, players can not only earn at random, but in some games, such as “Axie Infinity,” clone, breed or create new collectibles of value. These games have become wildly popular in parts of Asia, such as the Philippines, where it’s becoming a budding profession to help people out of poverty. 

For the past two years, investors viewing the gaming space as an opportunity have been sold on P2E games being the next big thing. 

There are ideas and pitches that P2E games will replace the free-to-play (F2P) model, which saw the rise of everything from “League of Legends” to “Fortnite.” Venture capitalists invested more than $2.5 billion in studios and publishers building play-to-earn games and metaverse platforms in Q1 2022 alone, according to DappRadar. But the data to support that P2E is the next F2P isn’t there yet—especially in the Western world.

This week served as a sobering reality: Cryptocurrency is highly volatile, and when the coins that are seen as stable—namely Bitcoin and Ethereum—get hurt, so does everyone. So play-to-earn games are on notice, and until the crypto industry shores itself up, it’ll continue to rise and fall on the tides.