The gaming industry, a powerhouse in profitability, is now at the forefront of crypto industry adoption. Known for its volatile price action in the previous cycle, the sector offers high returns with associated risks. Despite facing criticisms for unsustainable play-to-earn models and low-quality gameplay in the previous cycle, GameFi is poised for a transformation. The current cycle shows significant improvements, setting the stage for these games to compete for organic gamers' adoption. 

The figure below shows the gameplay from the previous cycle vs the current one.

In this article, we dive straight into the GameFi protocols.

Infrastructure

No one knows which game will be the next PUBG or Minecraft, therefore the best bet (low risk) could be Immutable X, which is the gaming infrastructure that benefit from the FAT protocol thesis (the infrastructure provider that accrued value from the protocols built on-top). $IMX is the clear pick, it has multiple collaborations with established institutions and game studios such as Amazon, Ubisoft, Unity, Polygon, Merit Cycle, VeVe, Illuvium, Gods Unchained, Guild of Guardians and much more. The token has clear utilities such as protocol governance, gas payment and protocol fees. Its TVL has increased 2.8x since October and achieved an average $20 million monthly NFT sales volume. 64.4% of its supply is currently in circulation, and it is expected to have an annual unlock inflation of 30%.

“Sector-rotation”, a phenomenon that describes a price surge from one token to another consecutively, can be elucidated by traders taking the profits from mainstream tokens and bringing into tokens that were yet to have the run. Bitcoin dominance has increased by 1,167 bps in 2023, demonstrating an above-average growth compared to altcoins. However, this level of dominance could not increase indefinitely. The protocols with smart contract capability would eventually deliver greater value to users. The increased Bitcoin value would also lead to protocols underneath, generating higher revenue in terms of trading fees or collateral interest charges.