How To Spot Crypto Games Ready To Compete With Axie Infinity, Chen Li

  • Venture capital firm Youbi Capital has been investing in crypto since 2017.
  • Chen Li, Managing Partner at Youbi, explains why investing in blockchain games has become so popular among VCs.
  • He shares his tips for spotting the game’s first winners, including 2 potential contenders.

Bitcoin and ether currently have a


liquidity

problem, according to Chen Li, managing partner of crypto firm VC, Youbi Capital.

Bitcoin, the world’s most traded cryptocurrency, has come under almost relentless selling pressure since it hit a record high of around $ 69,000 in mid-November. It has climbed higher in the past two days, but is still around 36% below this all-time high. Ether, meanwhile, has lost around 31% since peaking at nearly $ 4,770 in November.

The recent drop in prices is not surprising when investors consider the liquidity challenge, as well as the pressures of upcoming interest rate hikes by the market.


Federal Reserve

, he said.

Over the past year, more institutional and traditional financial investors have made the leap into crypto. But under the weight of interest rate pressures, both crypto assets will need many more buyers to raise the price, Li said.

“The market capitalization is already huge for Bitcoin and Ethereum,” Li said. “We need significant liquidity.”

To achieve this, it is necessary to reach a wider audience, which might not be exploited in the financial markets or the crypto ecosystem.

Crypto venture capitalists are betting that gaming could be a key entry point to reaching mainstream audiences, much like massively multiplayer online (MMOG) games such as World of Warcraft or even The Sims have. initially attracted people to the web. .

“We see [gaming] as an entry point for mainstream adoption, because as we saw in web 2.0 in the early 2000s, the internet, MMORPG games, were the entry point for people to use the internet, ”he said. Li said. “But I think this time it’s a similar story.”

Chen Li, Managing Partner at Youbi Capital

Chen Li, Managing Partner at Youbi Capital

Youbi Capital


Blockchain gaming has become a central focus for Li’s venture capital fund, which has been around since 2017 and is primarily invested in crypto infrastructure and decentralized finance.

“DeFi and the games are very similar,” Li said. “A lot of DeFi games are just packaged in a game package.”

Focusing on these two areas of crypto, Li places great importance on the team and their ability to build community and create an easy-to-use product.

Identify the winners of the game

It also uses on-chain data to find opportunities in space. It helped him stumble upon a game that turned out to be a bigger winner in recent weeks.

Defi Kingdoms is a little-known DeFi game that has surpassed Axie Infinity in popularity based on volume trends, according to Footprint Analytics.

In December, Li started monitoring this metric and as it started to increase significantly, he built up a position in the game’s native token, Jewel.

“I think it was before Christmas, the volume was just over Axie and we were so impressed,” Li said. “And that was a big reason we invested in it.”

Defi Kingdom’s Jewel token has jumped 191% in the past month, from $ 7.16 to $ 20.81. During the same time frame, Axie Infinity’s AXS token fell 25% from $ 104.26 to $ 78.15.

The platform it uses to access on-chain data is Footprint Analytics, which offers free and premium services. It uses the GameFi dashboard to explore game analytics.

Looking at the “Top 10 Game Rankings (Last 10 Days)” chart, Li saw the traction Defi Kingdoms was garnering against Axie Infinity. The Bombcrypto game has come in third in recent days, which could also pose a potential threat to Axie’s leadership.

Li is not invested in Bombcrypto, but points out that it could be a potential opportunity for investors, based on a graph that reflects the number of GameFi users per blockchain. For Binance Smart Chain, Bombcrypto suddenly takes a lot of market share, overtaking the metaverse MOBOX gaming platform.

“A week ago, MOBOX accounted for 90% or more than 90% of these types of PvP card games,” Li said. “But now Bombcrypto has just taken almost half of the market share.”

When looking at the charts, the most important factors are volume and liquidity, Li said.

The volume is converted into cash income, which can then be used to further develop the game and scale the community, he added.

“This is the number one success factor that we use to evaluate games,” Li said.

Liquidity is also important because it makes it easier to enter and exit the game, which is important in attracting many new players, Li said.

Looking more at the fundamentals, Li sees opportunities for “Cradles: Origins of Species”, a portfolio company that offers MMORPGs – massively multiplayer online role-playing games.

The game is all about interaction and the flow of content, while most other popular blockchain games are very modular, Li said.

“Cradles” allows the community to give their opinion and participate in development. Developers are also being rewarded for their in-game creations with a significant reduction in the revenue from new created content that goes to them, Li said.

“It’s similar to the business model of Roblox and Minecraft, where they also allow third-party developers to create new games,” Li said. knows because, you don’t know the transactions, they keep their own books. There is no transparency. “

Investing in blockchain games, however, involves a shift in mindset, Li said.

The cost of acquiring users is very high, Li said. Initially, the founding team needs to build up the cash pool and pay its market makers as well as the people who sell their tokens.

But then the early adopters essentially become market makers and investors in the game, which creates a bigger stake in the success and development of the game and the community.

“Instead of involving the VCs, they just opened up this cash pool to involve these early adopters in the community as investors,” Li said. “It really embodies the spirit of the web. 3.0, which means the network is owned by its users. For games, the network is always invested and owned by the players. “

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