Guess who may not be fans of the blazing Ethereum-based gaming platform Axie Infinity?
It’s crypto traders – surprising given that AXS, the governance token of Axie Infinity, has logged a year-to-date price return of over 7,000%, compared with bitcoin’s roughly 33% and ether’s 212%, according to Messari.
This trader bearishness could affect the price of the AXS token despite Axie Infinity being a blockchain-based project with solid fundamentals and great revenue models.
“The euphoric-herd mentality pushed the valuation to extremes and, as with any overcrowded trade, once the unwind takes place the price swings will be extremely volatile,” Denis Vinokourov, head of research at London-based quantitative finance management firm Synergia Capital, said. “The problem is market timing – timing the top of the market – is notoriously difficult.”
Trading data from crypto exchanges shows futures traders have been aggressively taking short positions on AXS, betting the token’s price bull run will face downward pressure soon, as the perpetual futures market for AXS has consistently seen negative funding rates.
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The funding rate refers to the cost of holding long/short positions in one crypto’s perpetuals (futures with no expiry) market. The metric is used by exchanges offering perpetuals to balance the market and guide perpetual prices toward the spot price. A positive funding rate means longs are paying shorts to keep the position open, as the market is skewed bullish. A negative funding rate, meanwhile, implies a bearish sentiment towards the token associated with the perpetuals.
The funding rates for AXS perpetuals on the two major crypto exchanges offering such products, FTX and Binance, have been negative. At the time of writing, data from FTX shows the one-hour average annualized funding rate for AXS perpetuals was at -42.92%, while the eight-hour-basis funding rate of the AXS/USDT perpetuals on Binance has been negative for at least 14 days.
This bearish take by crypto traders looks odd as Axie Infinity, the Ethereum-based trading and battling game, has received much positive reaction from the market. The project has also quickly become the top protocol on the Ethereum blockchain by revenue.
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Data from Token Terminal shows that Axie Infinity has logged the highest revenue in the past 30 days among all blockchain-based protocols, with roughly $148.7 million, only behind Ethereum blockchain itself, which is at $172.8 million.
Axie Infinity “is a company with a CEO, a parent company with privately owned equity, a real business model and rapidly growing revenues, all of which existed prior to Axie issuing its AXS token,” Jeff Dorman, chief investment officer at Los Angeles-based investment management firm Arca,…