Axie Infinity, a well-known Play-to-Earn (P2E) platform in the crypto space, is facing significant selling pressure at the moment. The price of its token AXS has dropped by 22% as of 24 October, according to CoinGecko data. The token touched a 52-week low of $8.58 earlier today.
Driving AXS’s downtrend is the unlocking of $215 million worth of AXS scheduled for 26 October.
To counter the selling pressure, Aleksander Leonard Larsen, Axie’s Chief Operating Officer Sky Mavis, highlighted the fact that he “will not be selling a single token” of the upcoming unlock.
What do we know about the AXS unlock, and how is it connected to the price drop?
The Axie Infinity unlock event will see more than 21.5 million tokens put into circulation. AXS’s current circulating supply is at 103 million, and the token unlock will account for approximately 8% of the entire supply of AXS, according to data site TokenUnlocks.
Almost half of the unlocked AXS tokens will be directed to members of the developer team ($57 million), advisers ($25 million), and early investors in a private sale round ($20 million). The leftover tokens will go toward servicing the Axie Infinity ecosystem through staking rewards, P2E rewards, and other ecosystem funds.
Players earn Axie’s in-game cryptos and Non-Fungible Tokens (NFTs). They can sell, trade, or abuse these tokens to level up their characters.
This unlock, which increases token supply in the market, is at the heart of the selling pressure. The fear that retail investors will sell their holdings following the scheduled unlock and distribution has caused many to sell their AXS.
The Axie Infinity ecosystem uses a vesting schedule where tokens are unlocked at specific times. This was meant to control the amount of supply of tokens in the market and its value. But vesting only works if the market also has been maturing simultaneously. However, this has not happened in Axie Infinity’s case.
The gaming platform has struggled to keep growing in recent times. Its player count dropped from January’s 2.78 million to slightly above 701,447 today. The downward trajectory of its user growth numbers have added fuel to the fire in the current situation.
In addition, the ongoing crypto winter was not the best thing for the gaming platform’s assets. After experiencing a spectacular momentum in 2021, AXS lost 94% of its market value in less than a year.
The Ronin hack from March, which hit Axie Infinity’s custom built sidechain, also did not help.