Crypto: the future of gaming?

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HEALTH, WEALTH, AND HAPPINESS

Feb 2, 2022

"A wise person should have money in their head, but not in their heart."

- Jonathan Swift

New downloadable scorecard! Shibu Inu (SHIB), the meme coin that's an alternative to Dogecoin (which was itself started as a joke), has exploded in popularity.

Our analysts treated it seriously. Paid subscribers can download our report here.

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Indian Government Brings Crypto Under Legal Framework (Government of India): For Indian citizens, all "digital virtual assets" will now be taxed at a flat 30% when sold or exchanged at a profit.

Investor takeaway: This should bring comfort to those who thought India might ban crypto entirely, but some are shouting that this will cause Indian crypto companies to move elsewhere.

This is similar to the current U.S. tax policy on crypto (profits are taxed as capital gains, which is around 30%), and it's likely to become a global standard.

Once again: letting your money grow is free (and now officially legal in India).

The price of bitcoin spiked following the India news, before ending the day where it started (courtesy Bloomberg):

Investor takeaway: As long-term investors, we don't really care about the short-term price spikes. We do care about global adoption of cryptocurrency.

To have the world's second-largest country on board the blockchain bandwagon is big news. Thank you, India!

How does crypto fit into gaming? With nearly 40% of the population (2.7 billion gamers out of 7.9 billion people on the planet) involved with this activity in some way, I see gaming as potentially the largest avenue for crypto adoption.

While reports vary, one shows that there were 300 million crypto users by 2021, which would be roughly 3.7% of the population.

Crypto gaming is inherently inclusive, because it can be accessed everywhere by using digital currencies.

Additionally, with the advent of NFTs, players can own game elements such as player characters or skins and be actual economic participants, instead of just users.

Further, many crypto games are incorporating a new economic model, the Play-to-Earn concept. Where this is successful, gaming could literally be turned into a side hustle or profession.

This is spreading across the developing world, where we have seen a wave of new participants in this P2E economy.

A perfect example is the Philippines, where Axie Infinity caught on like wildfire.

I may have been somewhat bullish about the future, until I spoke to a billionaire who blew my mind.

And no, I don't mean Mark Zuckerberg, who announced in October that Facebook, Inc. was changing its name to Meta Platforms, Inc. and investing in the metaverse.

I am referring to crypto OG Changpeng Zhao, or CZ, the founder and CEO of Binance, who jumped into his first Twitter Spaces ever with none other than the Quantum Economics team.

It turns out he was even more bullish than me. To paraphrase his words, any game being built off the blockchain will be at a tremendous disadvantage and will be struggling to survive in less than five years.

Since then, I have been paying a lot more attention to the crypto gaming space, and after crunching some numbers, I wanted to share my perspective as far as investors are concerned.

Investor's Take

We are still early, and extremely early to be precise. The top blockchain game for desktop, Alien Worlds, has 1.2 million mobile active users (MAU). That's 0.03% of the world gaming market.

That has both a positive and a negative side. Many world-class video games capable of capturing hundreds of millions of users take five years, or even longer, to develop.

While there may be hundreds of P2E or "gaming" cryptocurrencies, many of these are connected to a game that may never even go live.

This is a high risk/high reward situation, and I project it will reward those willing to HODL for a number of years. Here are three potential investor strategies that keep this in mind:

1. Invest in Layer Two-Friendly Blockchains where Games are Being Built

This would be the least risky strategy, as these cryptocurrencies capture the growth of crypto gaming, but they also capture growth in other areas such as NFTs and DApps. These are familiar names.

The most popular include Binance and Polygon, which are my two favorite and have the most active users in crypto gaming right now. Wax and Solana are two other big names in the space.

2. Invest in Gaming Launch Platforms/Engines/Launchpads/Guilds

Invest in cryptocurrencies powering gaming platforms, which brings greater exposure and also more risk. Examples include SAND, GALA, ENJ or YGG.

Taking this approach is less risky than investing in a single game, because these digital currencies could pump based on the success of any number of games on their platforms. They are not as risky as single games, which depend completely on the popularity of one game.

3. Invest Directly into Games

This approach provides direct exposure with in-game, low-market cap cryptocurrencies such as ATLAS, POLIS, TLM, MBOX and many others that will likely pop up in the next two years.

They provide the greatest potential gain and the most risk, since their respective games could either never develop or fail to achieve popularity.

As always, this is not financial advice or a solicitation to purchase any crypto. Doing your own research is crucial.

Make it a great day!

Sincerely,

Alexandre Lores

Opportunity Analyst

Ok, Jack.

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