The Fall of Axie Infinity (AXS): Understanding the Price Crash

Axie Infinity, once a flagship project of the “play-to-earn” movement in blockchain gaming, has seen its token AXS collapse in price, from an all-time high of $164.90 in November 2021 to approximately $2.86 as of May 2025. This staggering 98% drop is more than just a reflection of shifting market trends; it is the culmination of structural issues within the project’s economic model, game mechanics, investor sentiment, and broader macroeconomic forces.

One of the most immediate and quantifiable factors behind the AXS price crash is the scheduled token unlocks. AXS, like many crypto assets, uses a vesting schedule to gradually release tokens into the circulating supply. In October 2023 alone, over 15 million AXS tokens were unlocked, valued at around $69 million at the time. These influxes increase the token’s supply and, in the absence of proportional demand, depress its price. This naturally raises the question: How do scheduled token unlocks impact the supply-demand balance of a cryptocurrency, and what mechanisms can projects implement to mitigate potential negative effects? Token burn mechanisms, staking incentives, or delaying unlocks are among the common tools, but Axie Infinity struggled to adapt quickly enough.

Compounding this issue is the dramatic decline in Axie Infinity’s player base. In early 2022, the game boasted 2.7 million monthly active users. By mid-2023, that number had plummeted below 500,000. Axie Infinity’s success hinged on its ability to constantly attract new players to sustain its play-to-earn economy. Fewer users mean fewer transactions, less demand for in-game assets, and ultimately a shrinking token ecosystem. This leads us to consider: In what ways does a declining user base influence the economic viability of a play-to-earn gaming model? The answer lies in the feedback loop between player engagement, token utility, and price stability. Without new entrants, the economy collapses into a Ponzi-like structure where returns dry up.

The game’s economic model, initially lauded as revolutionary, soon revealed deep flaws. Axie Infinity relied on the Smooth Love Potion (SLP) token as a reward currency. However, the SLP was minted in excessive amounts, leading to hyperinflation and a 99% drop in its value. This undermined the core player incentive: to earn real-world value through gameplay. Instead of an innovative new economy, Axie’s structure began to resemble a zero-sum game in which latecomers absorbed losses incurred by early profit-takers.

Further undermining confidence was the Ronin Bridge hack in March 2022, one of the largest in crypto history. Hackers stole over $620 million in crypto assets, exploiting vulnerabilities in the game’s underlying blockchain infrastructure. Such a breach raises a broader question for all crypto projects: How do major security breaches affect investor confidence and the long-term sustainability of blockchain-based platforms? The hack exposed how security lapses, even in popular, well-funded projects, can irreparably damage reputations and trigger capital flight.

External pressures also played a significant role. As interest rates rose globally due to central banks tightening monetary policy, investor appetite for high-risk assets waned. Cryptocurrencies, including AXS, faced significant outflows as money moved toward safer, yield-generating assets like bonds. This macro backdrop prompts a final critical question: What role do macroeconomic factors, such as interest rate changes and market liquidity, play in the valuation of cryptocurrencies like AXS? In risk-off environments, speculative assets are often the first to suffer.

Finally, technical analysis indicators reinforced the bearish outlook. Chart patterns such as a “head and shoulders” formation and low Chaikin Money Flow (CMF) readings signaled heavy distribution and lack of buyer interest. These indicators validated the sentiment already reflected in fundamentals: investor confidence was gone, and recovery would require more than just another game update.

In conclusion, the crash in AXS price is not the result of a single failure but rather a cascade of interrelated issues. Tokenomics, user retention, cybersecurity, and global economics each played a role. Axie Infinity’s story serves as a case study in how crypto projects must evolve beyond speculative bubbles into sustainable ecosystems, backed by robust models, secure infrastructure, and long-term value creation.