Axie Infinity's Unexpected Resurgence Amid Market Uncertainty

The cryptocurrency landscape is currently overshadowed by global volatility, yet Axie Infinity (AXS) has emerged as a surprising exception. The AXS token has experienced a significant rebound, exceeding $2.4 and recovering all losses from the market sell-off last October.

Key Takeaways

AXS has rebounded over 200% since the year's start, surpassing $2.4.
The transition to bAXS rewards and increased interest in GameFi projects have driven this rally.
Caution is advised due to rising AXS balances on exchanges and stagnation in new active players on the Ronin network.
High open interest in AXS futures contracts raises liquidation risks.
The sustainability of AXS's rally depends on maintaining robust buying pressure amidst market volatility.

The pivotal question is whether this rally can be sustained. Analyzing multiple data points provides investors with a clearer outlook.

Understanding the Factors Behind Axie Infinity’s January Rally

Recent statistics from BeInCrypto Price reveal that AXS has surged over 200% since the beginning of the year, with daily trading volumes surpassing $1 billion.

This rally initiated following an announcement from the project’s founder regarding a shift in AXS rewards within Axie Infinity to an app-token version called bAXS. Players can utilize bAXS within Axie Core and stake it for additional benefits.

Surprisingly, this rally has persisted for over a week, defying a general market correction occurring during the same timeframe.

Data from CoinGecko indicate another key contributor: South Korean traders are instrumental in providing liquidity, significantly boosting AXS above the $2.4 threshold.

Of the daily trading volume exceeding $1 billion, Upbit alone accounted for upwards of $320 million, representing more than 32% of the total. Prices on Upbit have also traded at a premium compared to Binance and other exchanges, suggesting that South Korean traders are eager to pay higher prices, fueled by expectations of further price increases.

Additionally, a recent report from BeInCrypto points to a resurgence of interest in GameFi projects, as investors revisit and reallocate funds into previously overlooked GameFi tokens.

“Nostalgia is the most powerful emotion in the universe. There’s no other IP in crypto that can invoke both nostalgia for the past and excitement for the future. That’s where Axie excels,” remarked Jihoz.ron, Co-founder of Axie Infinity.

Cautionary Signs That Could Hinder the AXS Rally

The rally seen in AXS amidst a broader market downturn has led to skepticism among some analysts. In the crypto world, internal enthusiasm can sometimes overshadow external market fears.

“The $AXS pump doesn’t make sense.
But nothing in crypto makes sense anyway.
Enjoy it while it lasts.”
— xavie (@xavierverse)

Despite the strong price movement, concerning on-chain signals lurk beneath the surface. AXS balances on exchanges have risen alongside the price increase, implying more tokens are becoming available, which could lead to selling pressure.

A recent BeInCrypto analysis indicates that the average transaction count for deposits over the last seven days has hit its highest level in three years. On-chain data also shows that several large wallets have recently sent AXS to Binance.

As long as buying pressure remains robust, these inflows can be easily absorbed. However, if demand weakens, the trend could potentially reverse.

Another essential aspect to consider is the stagnation in new players on the Ronin network, Axie Infinity’s main platform.

Dune Analytics data illustrates that new weekly active addresses on Ronin remain below 10,000— a significant decline from over 500,000 in 2024— and show little sign of recovery.

This lack of expansion in the user base signifies saturation in the play-to-earn model, which had previously attracted millions during the pandemic. Without a new influx of players, AXS's recovery may encounter structural hurdles.

Furthermore, the open interest in AXS futures contracts has now surpassed $130 million, the highest level in three years. This increase indicates a heightened level of speculative activity, with investors leveraging their positions to anticipate price fluctuations.

High open interest generally suggests increased liquidation risks, particularly in volatile market environments. Such conditions heighten the potential for cascading liquidations, which could rapidly depress AXS prices.

The duration of the AXS rally hinges on whether positive catalysts can outweigh the various warning signs outlined above. Trading in this environment necessitates a careful balancing act of multiple factors to mitigate risk, as the market continues to grapple with unexpected and significant volatility.