Animoca Seeks to IPO in the US, Is GameFi Still Worth Bet On?

By Steven Ehrlich, Unchained

Compilation: Felix, PANews

Cryptocurrencies are all the rage again. Bitcoin hit an all-time high of $111,814, Coinbase became the first cryptocurrency company to enter the S&P 500 index, and more and more crypto companies are looking to go public.

One of them is Animoca Brands, a Hong Kong-based Web3 company whose stake is traded in private markets and spans everything from NFTs and crypto games to investment platforms with a portfolio of more than 500 companies.

The company, which was delisted from the ASX in 2020 due to its association with cryptocurrency, grew its valuation from $100 million to $5.9 billion in 2022, a major reversal during the pandemic. However, it faded into the public eye during the crypto winter, the NFT crash, and the subsequent meme coin boom. In addition, Oppenheimer's estimate of the global gaming market is $180 billion, and the GameFi boom has not attracted much attention, which is undoubtedly exacerbated.

Today, under the leadership of CEO Yat Siu, Animoca has developed a profitable business strategy. According to unaudited financial statements published on the company's website, Animoca made a profit of $97 million last year, an increase of 185% from 2023.

Today, influenced by the Trump administration's cryptocurrency-friendly policies, Animoca is one of many multinational companies seeking to strengthen their business ties with the United States, including listings on the NASDAQ or the New York Stock Exchange, among others. In an interview, Siu said: "We think the US is going to be the largest crypto market in the world, so it would be foolish if we didn't try to enter this market." But he cautioned that going public in the U.S. is just one of many opportunities the company is currently exploring.

What happens to the Animoca? It will depend on how well GameFi and NFTs are funded, and whether investors agree with Animoca's claim that the company is the best "shovel" type of investment in the GameFi movement.

The gaming industry is cold

Although the Trump administration's tariffs have had little impact on the global gaming industry, the industry remains highly vulnerable to changes in macroeconomic conditions. Martin Yang, senior analyst at Oppenheimer's equity research, said: "Overall, the gaming industry is doing okay, but not as well as it did during the pandemic. The gaming industry has experienced two years of strong growth, but now the overall growth rate is likely to be only 3% to 6% per year."

The situation is even more worrying for GameFi, which is primarily present in the mobile gaming market. Due to the freemium model and fairly low cost of mobile gaming, the market downturn may seem counterintuitive to outside observers, but it's an important detail to understand the gaming industry, as it explains why crypto gaming struggles to catch on.

Mike Hicke, senior analyst at The Benchmark Company, said in an interview: "The feeling was like, 'Oh, people are either not paying for the game at all, or they're just paying a little bit,' so it was thought that the mobile gaming model was viable and the macro environment was challenging." "But in fact, from a few years ago, we found that this is the most vulnerable market". He also said that even many large independent mobile game studios, such as Zynga, have been acquired, and many are facing layoffs.

How do these trends relate to the crypto space? The data shows that GameFi is underperforming, but this phenomenon may also be exacerbated by the fact that GameFi's loyal user base is much smaller than the overall gaming market. Ethereum is the dominant blockchain in the space, and its key metrics such as transaction volume and number of users have dropped significantly, as shown in the chart below (the second graph should be read from right to left).

Animoca's B2B layout

In this environment, Animoca's profitability has almost tripled in one year. How does it do it? By becoming the main liquidity engine or market maker of GameFi. Siu believes that it is more stable, safer, and perhaps even more profitable for Animoca to provide financial infrastructure support to these companies, such as an over-the-counter trading desk, than launching more games in an already crowded environment. "That's the evolution of business." "We know that a lot of small companies don't have that infrastructure when they launch games, and they don't know how to do it. We buy their tokens and provide capital market support. "It sounds like a financial business, but it's really just an extension of what is called an issuance business.

How does this affect Animoca's business? In 2023, the majority of the company's revenue comes from Web3 operational activities, including wholly-owned projects such as virtual worlds, chess games, and online education platforms. But from 2023 to 2024, this revenue has dropped by 39.5%, and 2024 has been an extremely prosperous year for cryptocurrency. But the company's profits jumped 185% year-on-year. What is the reason? Its digital asset advisory business grew by 114%, while all capital markets activity was focused on this business.

Can this continue?

Delta-neutral strategies such as market-making can be profitable both inside and outside the crypto space, and the data shows that Animoca has found a product-market fit in its unique area of expertise. But investors investing in the business need to be confident that the company can continue to grow revenue in this area, especially as GameFi's key metrics remain depressed.

This question is difficult to answer. One indicator that can tell the story is the trading volume of GameFi tokens on DEXs. As you can see in the chart below, the chart focuses only on Ethereum-based tokens, and although the daily trading volume does reach hundreds of thousands of dollars, it is trending downwards overall. Other blockchains such as Polygon and BNB are showing the same trend.

This is important because DEX trading volume is more reflective of actual user demand for certain tokens, while CEX trading volume is more considered to be for speculative purposes. It's unclear what percentage of that volume comes from the work Animoca does for clients, which is a significant blind spot for investors.

An optimistic reading of Animoca's performance is that the company has found a way to operate profitably until it can catch the next GameFi wave, provided it comes. To that end, Siu said Trump's support for the crypto market will be especially important because the poor regulatory environment in the United States has prevented large American gaming companies from venturing into the space.

"We're working with large institutions and we're actually leading them into crypto," Siu said. "It's kind of a bit of a confidence [on a global scale], but in the U.S., it can be difficult to communicate with the big game companies. They do talk to us a lot and say, 'Tokens are interesting, we need to look into them.'" But...... If the legal nature of something (the legitimacy of the token) is not entirely clear, then you have to leave it to the lawyer's speculation." The implication of Siu is that his call for his foray into the crypto space will be vetoed.

If Siu and Animoca can win over giants like EA Sports (which is certainly a big assumption), then another major problem with crypto gaming may be solved: the lack of replayability and the lack of positive player reaction to the industry's over-financialization. Analyst Mike Hicke said, "When you force a monetisation mechanic into your normal gaming experience that doesn't improve the experience, players get to resent this kind of corporate-led monetisation strategy."

Related reading: A look at the 17 Web3 games that will be discontinued in 2025: Behind the great ebb of blockchain games, there are financial difficulties and confidence crises