Crypto x Gaming Installment 2.5

By now you should be well versed on why we believe the intersection of crypto and gaming will give rise to some amazing opportunities. The previous instalments in crypto x gaming had no actionable information. We did share a pricing model and calculated a fair price for Axie in the first instalment, and the price has done a quick 3x since that publication, but the visuals and playstyle of the game were not to our liking. Axie is a play to earn game, with the emphasis being on the earn aspect. How much interest/traction would the game have, if there was no crypto or ‘earn’ aspect? That is what prevented us from entering at that point.

Instalment 2 simply outlined how much hype there is for gaming projects, that have achieved immense valuations with no actual gameplay available yet, like Illuvium. Well we think we’ve identified a market inneficiency. With it comes high risk, but the possible reward is even higher. Read on below to find out the project and our thesis and projection for it!

If you’re in a hurry scroll down to the bottom, for the TL;DR section.

Disclaimer: NOT FINANCIAL NOR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.

Treeverse

The game we’ll be looking into today is Treeverse. Treeverse aims to become ‘crypto’ Runescape. Most people who used the internet in the 2000’s are familiar with Runescape. It’s really encouraging to see a project not look to reinvent concepts and approaches to gameplay. Instead they look to take a gameplay model and approach that has been proven to work and use crypto to further enhance it. Don’t forget that Runescape had a vibrant economy and is engrained in online culture, having influenced a lot of people currently present in the crypto space. Fun fact, the creators of Mango Markets started market making on Runescape.

Anyways let’s not go off topic, back to treeverse. For a game which aspires to imitate Runescape and follow the same recipe, the visuals are really important. The gameplay and aesthetics have to be available to the same standard on both browser and mobile versions. As you can see below, their choice of visuals is well suited to this goal. They are also appealing to a wide audience. Remember, games need to be ‘play to play’ to work, the ‘play to earn’ feauture should just be a feauture and not the main attraction.

Now with gaming projects you want to have exposure as early as possible. You want to be entering along with seed investors if not earlier. Sadly, this comes with extremely high risk. Being so early in the development of a project means there will not be a lot of work/progress to be shown. You are effectively making a long term bet on the development team and their vision for the game.

Well Treeverse just finished their first seed funding round, raising 1.5 million USD with a valuation of the project at 25 million USD. The valuation of the project is public knowledge, whilst the amount of the raise is private, and the number reported comes from a reliable source. This implies a 6% seed round. Let’s convert that valuation to ETH, because we all know that ETH>USD. So a valuation of roundly 7,000 ETH for the Treeverse project as it stands.

Now you might be wondering why there is a collection of anime profile picture avatars midway through this article? Well these are the ‘Timeless’, a generative collection of avatars. These avatars will also be playable in-game. Owners of them will be able to have them represented by their in-game 3D model. The only way to acquire one is by owning a Founders Plots. These are in game land with houses represented as NFTs, which act as a mint pass for the above collection. They can be purchased on OpenSea here. 1 Founders Plot = Minting 1 Timeless.

What makes this particularly interesting is that the founder of the game announced that the Founders Plots and associated Timeless collections will be the only way to gain exposure to the game (see the above embedded tweet).

Now before we outline our thesis regarding the true value of the Treeverse project let us look at the distribution of ownership for the Founders Plots. As you can see below they are very well distributed with very few ‘whales’. This is important as this will be the same distribution that the Timeless will have (remember one Plot = one Timeless). The number of unique holders has also been steadily increasing, and the Plots along with the Timeless will be very well distributed. There have been less than 500 Plots listed for sale over the last two weeks on Opensea, and we expect this to decrease approaching the mint of the Timeless. You can check the number of unique holders here, or just sum up the bars in the below graph. There are currently around 3,800 unique holders. Unique holders and their distribution are important as owners with 1 or 2 Founders Plots (and in turn Timeless when the mint goes live), will have diamond hands. Don’t forget that the announcement of the Timeless was well after the release of the Founders Plots and was not expected. For the collectors who have accumulated a larger number of Founders Plots, it is clear they have conviction regarding the project. To accumulate so many Plots you need conviction in both the team and project, and it doesn’t make sense to sell before the game fully releases. This should lead to an ever dwindling supply of Founders Plots and Timeless being available on the market.

What we have here is the opposite of what most NFT projects do – release a pfp collection and raise capital to make a game. Treeverse already has a proof of concept with a functioning alpha release, and is releasing the Timeless to reward their early supporters, whilst also enhancing the gameplay for them. In the alpha owners of Plots had the ability to display their NFTs in their Plot which had a house, creating an open and interactive gallery experience. The developers have clearly demonstrated that they are looking to actively reward early supporters, which for us is the most important aspect. Especially as with the purchase of a Founder Plot, you are one of these ‘early supporters’.

Hopefully with the knowledge from the first two crypto x gaming instalments (refresh your knowledge here and here), you will understand our view of the project and associated opportunity. Outside of our intuition and gut feel, we need to check some numbers!

Follow along with the assumption here. The market cap of the game is equal to the 10,000 Founders Plots and accompanying Timeless collection. With a floor price sitting relatively steady at around 2ETH per plot and 0.2ETH to mint a Timeless. This implies a market cap of 22,000 ETH (75 million USD) for the game. The valuation at which capital was raised was a third of what the market says the fair valuation is. This is logical as a lower valuation is beneficial for the seed investors.

To put this into context, at a similar stage of development Illuvium raised 5million USD in a seed round prior to releasing a token. When acquiring ILV became accesible to everyone, it had a market cap of 50 million USD, simply due to having a token. Illuvium now has a market cap greater than 400 million USD, and we have still to see a publicly playable alpha version of the game. And don’t forget, the creation of a token is extremely straightforward for an experienced team. With this as a comparison, the market cap for Treeverse should be around 200 million USD, as it is further along in development than Illuvium was when their token launched, but doesn’t have a token yet. In terms of future potential however, we believe Treeverse could surpass Axie, as the Runescape gameplay model has been well established, it brings back nostalgia for the majority of the people in crypto, and well their game simply looks more appealing.

 

TL;DR

We like the gaming sector, and have been looking for opportunities. This one is not ideal as we would have preferred a token, but it is still early enough that the potential reward over a 1-2 year timeline could be immense, justifying the higher risk present. So where is this all going ?

  1. Well at the current point you’re able to gain exposure to a play to earn project at a comparable valuation to what seed capital is getting.
  2. It’s a cross platform game, and we’ve all seen how well mobile games have performed recently. The market cap of Treeverse is less than the monthly revenue of Axie. Jagex, the company that owns Runescape did 150million USD in revenue in just 2020.
  3. Development of the game has been rapid, and due to funds raised from the founders sale, they have been able to hire a mobile specific team. Development on the mobile version has already begun with the recent fundraising round providing further ammunition.
  4. The team and founder are exceptional and very responsive. Feel free to enter their discord and ask any questions, they’re extremely helpful and transparent.

As we always say ‘product first, token second’, and this is the case here. Well not a classical token, but an NFT. Combined with the team and the pace of development, this led to the author acquiring two Founders Plots (#4452 and #4290). They were bought at a price of 2 ETH each. Long term we believe the risk/reward present here is exceptional.

Due to the limited supply of Founder’s Plots available, combined with the <500 Plots listed on OpenSea we want to be clear that the decision to buy a plot is completely up to you. We are not looking to ‘dump’ on our members, and we do not receive any benefits for writing this piece. We are simply sharing our thought process and holdings to be transparent.

2 ETH is a significant amount of money to most people, so please do not FOMO in. Make sure you are at peace with any decision you make, as at the end of the day you are responsible for your actions. This is an extremely high risk/reward play and is only reccomended for anyone who is well capitalised and experienced in the crypto markets, has control of their emotions and a long-term view. (This should apply for members who have been with us for a long time hopefully !)

You are welcome to check the author’s wallet adress 0x14e405d9ff39d33f60dc1af8cb44cbd9e115bbc4 and monitor their activity.

 

p.s. I’m not considering listing or selling until the full game release. I want to actively play the game and I am excited to see what Loopify and the team can deliver. And the insanely high risk/reward doesn’t hurt. 

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