GameFi and Metaverse least affected by Terra debacle: Report

Blockchain gaming and the Metaverse have managed to ‘sidestep’ the ‘Lehman brothers-like’ collapse of Terra in May – although decentralized finance (DeFi) and non-fungible tokens (NFTs) have not been so lucky, it says a report.

In a Friday report from decentralized applications (DApp) data aggregator DappRadar, the collapse of Terra in May was similar in scale to the subprime mortgage crisis of 2008 – prompting DeFi, NFTs and firms such as Three Arrows Capital (3AC), Celsius and Voyager cop most vulnerable to Terra’s destruction:

“It is becoming clear that the Terra debacle has become a Lehman Brothers-like event that has sent shockwaves across the breadth of the crypto industry and aftershocks that will affect us for many months.”

However, DappRadar noted that blockchain games and metaverse projects showed either minimal downside or even positive signs of growth during the same period.

Weathering the storm

The report compares various metrics to show how the Terra collapse (in mid-Q2) affected the performance of various sectors within crypto between the first two quarters of this year.

A key metric the report looks at is the number of transactions, or the total number of completed transactions, which essentially shows user engagement. DeFi and NFTs saw the biggest declines at 14.8% and 12.2% apiece, while blockchain games and NFT-related metaverse projects “managed to sidestep the subsequent bear market” by posting increases of 9.51% and 27% each .

The report also added that while the average amount of activity from unique active wallets (UAWs) in NFTs fell by a hefty 24% in Q2, blockchain games saw a drop of just 7%, suggesting that users continue to interact with gaming DApps “at more or less the same rate as before the Terra incident.”

Trading volume for metaverse-related NFT projects was also described as a “beacon of hope”, as volumes increased by a whopping 97% since Q2, despite the overall NFT sector having a 32.66% drop in Q2.

In a separate DappRadar report from July, the firm suggested that blockchain games may have been able to outperform other crypto sectors last quarter due to the non-speculative aspects of the games themselves.

“This bullish activity indicates that engagement with the virtual worlds is not based on their profitability for the end user. It shows that virtual worlds themselves are fun for the end user as communities remain active despite the devaluation of native tokens,” the report said.

DappRadar also said there was sustained institutional investment in both blockchain gaming and Metaverse, highlighting that many top companies see the potential for strong economic growth in both sectors going forward.

Related: Metaverse visionary Neal Stephenson is building a blockchain to elevate creators

The report went on to emphasize that the amount of investment in blockchain games and metaverse projects remained consistent during the second quarter despite the Terra bleed:

“Despite an economic blow and undermined confidence in the industry, investors remain positive as the number of investments in blockchain games and metaverse projects has remained constant quarter-over-quarter, with $2.5 billion invested in both Q1 and Q2.”