Metaverse Tokens AXS, SAND Plummet as Meta Reports $10B Loss

Metaverse-related tokens took a hit in the past two days as Meta, formerly known as Facebook, reported a $10 billion loss on its augmented and virtual reality division in an earnings release earlier this week.

The metaverse broadly refers to a virtual world in which people can interact as they do in the real world, but digitally.

Tokens of blockchain-based games Axie Infinity (AXS), The Sandbox (SAND), and Gala (GALA) fell as much as 12% in the past 24 hours, continuing a slide since Wednesday night.

In early Asian hours on Thursday, AXS fell to under $46 before slightly recovering to $49 in afternoon hours. It traded over $53 before Meta’s earnings release on Wednesday. AXS now sits at support levels last seen in September, before the tokens began a multi-month run to all-time highs of $162 in November.

The drop in token prices was coupled with falling user activity on Axie Infinity, crypto research firm Delphi Digital found, partly in connection with the game’s native smooth love potion (SLP) tokens.

“As SLP prices dip, players suffer as they cannot earn as much when compared to a few months back,” Delphi analysts said in a note. “At its peak, a player could have earned $35 per day on July 21 vs $1 today at current prices (assuming 100 SLP/day). This has led many players to stop playing as the income has been reduced massively.”

Price-charts for SAND and GALA show similar woes. SAND prices dropped 50 cents after Meta’s earnings release, declining as much as 10% in a 24 hour period on Thursday. GALA dipped to $0.18 from $0.20 in the same period. Both tokens gained slightly in Asian morning hours on Friday alongside a recovery in the broader crypto market.

The metaverse concept has gained traction in the past year, alongside the rise of non-fungible tokens (NFT). Metaverse iterations extend from electronics giant Samsung opening a pop-up store in Decentraland to crypto exchanges FTX.US and Binance.US setting up offices in Solana-based Portals.

But reality has been more sobering. Metaverse games continue to cater to a niche in the crypto market, while virtual reality divisions like Meta’s Facebook Reality Labs (FRL) pile on losses.

Are metaverse tokens and metaverse stocks correlated?

Some developers say the market performance of traditional companies focused on the metaverse could drive correlations in metaverse-based tokens.

"There surely is a correlation between the success of Meta with its metaverse efforts and the perceived potential of metaverse/play-to-earn projects and tokens,” explained Adrian Krion, CEO of blockchain gaming platform Spielworks, in an email to CoinDesk.

“There's been a surge of interest in the space since Facebook's rebranding, so any setback in Facebook's metaverse strategy will directly impact the market perception of other metaverses,” Krion added.

Others say metaverse tokens are a proxy bet for investors until metaverse stocks gain more traction.

“Without clear utility for the value of the metaverse tokens, it serves as a proxy for investor's sentiments on the future of the metaverse,” said Vincent Choy, ecosystem architect of Oz Finance, in an email to CoinDesk. “I believe that there will correlation between the tokens and stocks until the industry matures a lot more.”

The Facebook Reality Labs (FRL) division made $2.3 billion in revenue in 2021, a fraction of the over $116 billion generated from Meta’s various businesses, such as Facebook, photo-sharing application Instagram and messaging platform WhatsApp.

Meta isn’t retreating despite the losses. CEO Mark Zuckerberg said Wednesday the company's metaverse developments include releasing a high-end virtual reality headset by the end of the year and that the company would continue to work on "Nazare," a pair of fully augmented reality glasses.