The Metaverse is a growing buzzword in the world of investments, so it helps to know the ways you can gain exposure to it from an investment standpoint.
The Metaverse name has been everywhere in 2021, and it is only set to grow. NFTs have cemented their name in The Collins Dictionary, Facebook recently announced it was changing its name to Meta, and tokens are a growing component of the resulting virtual universe the tech and gaming space seems to be heading to.
All this may leave you wondering whether the Metaverse is the future as everyone claims, and whether you should bother investing in it. After all, the Metaverse itself is not well defined and the jury is still out on how it will function.
What is the Metaverse?
Before starting off on the investment options, it will help you to know what the Metaverse is, in the first place.
All the Metaverse hype is driven by two catalysts: the first was Facebook changing its name to Meta Platforms because it sees growth potential in virtual social networking and VR, and the other is the boom in real estate value within the virtual destination of Decentraland (whose cryptocurrency is MANA).
While the Metaverse does not have a solid definition, you can understand it simply as a new form of the internet that seeks to close the gaps between the virtual and physical world. To facilitate the bridging of this gap, AR (augmented reality) and VR (virtual reality) are essential to this conversion. Additionally, you also need worlds such as Decentraland that have a system of governance starting from their user base instead of the company executives. Thanks to this new system of freedom, this is attracting both commercial opportunities, as well as users.
Other than the Metaverse attracting companies, crypto developers, and software, there are plenty of hardware companies that are willing to create infrastructure to facilitate the changes, and they are putting investments into the Metaverse as well.
Why Is Ethereum the Basis of the Metaverse?
A quick look at the tokens you can use within the Metaverse reveals a peculiar fact – most, if not all, are based on the Ethereum blockchain. The coin itself is based on blockchain technology like all cryptos, but there are some reasons it remains popular in the Metaverse. These reasons include:
- It supports decentralized application – unlike most cryptocurrency blockchains, Ethereum surpasses the usual coin by its support of decentralized applications. This allows its users to create and issue their own tokens within the blockchain, which has led to numerous game developers creating their virtual currencies such as SAND and AXS on the platform.
- It is open source – Ethereum allows users to create their applications on it through its unique programming language, Solidarity. This allows developers to create their own apps and currencies without interference, and access the help they need through the community.
- It does not have limits – unlike Bitcoin that has a fixed amount of coins, Ethereum does not have a set market cap.
- Offers smart contracts – a peer-to-peer contract can function as collateral, so the use of smart contracts in the Ethereum blockchain eliminates the need for third parties, and boosts transaction speeds.
- It hosts plenty of ICOs – most initial coin offering sales are launched on the Ethereum blockchain, with most ICOs being built on the ERC-20 standard.
The Ways You Can Invest in the Metaverse
There are several methods you can use to make your investment, but the best way is through purchasing NFTs, also known as non-fungible tokens.
NFTs
NFTs are video clips, audio clips, or graphic arts that allow you to own a virtual asset on a blockchain; because of this, they are capable of changing the social networking paradigm of user transactions, socializations, and interactions within the Metaverse.
They are influential in the Metaverse because of:
- They promote a fair and open economy
Currently, businesses and users can move their real-world services and assets into a decentralized virtual environment, the Metaverse. One method of increasing this conversion is through unique gaming models that rely on blockchains you can operate across different games.
The most common approach is the play-to-earn gaming model that empowers and engages players. Through relying on NFTs to do their transactions, you can participate in in-game economies within the Metaverse and find rewards, allowing you to earn as you play. You will also get full ownership of your assets, instead of the game controlling them. Some good examples of play-to-earn games are My Neighbor Alice and The Sandbox.
Additionally, you can assess the popularity of play-to-earn games through the play-to-earn gaming guilds. These guilds function as intermediaries, as they buy NFT resources like assets and land, then lend them to players that want these assets to earn yields in the virtual worlds while earning a small portion of the earnings.
Overall, this assists to promote a fair and open economy, since players without capital can get a head start by going through the guilds. You can also get real-world value by using the assets in the virtual world, and the economic value each NFT has within the game is measured by the use case in the respective Metaverse module. This will give you the freedom to select the content type you want to generate and use in different games.
- Extends social experiences, unique identity, and community
NFTs also play a major role in social, community, and identity within the Metaverse, since holding assets are signals that users support of the project or show different perspectives of the virtual and real world. Through this, individuals with similar outlooks can form communities that create content together and share their experiences.
Through an NFT avatar, it is possible to create a representation of your imagined or real self, as well as change locations within the Metaverse.
- Owning virtual real estate
Through NFTs, you can own virtual spaces and lands in the Metaverse, as well as trade them if you wish to earn an income. Some activities include building structures like shops, renting land out for passive income, hosting social events, and selling land to get a profit.
Purchasing Metaverse stocks
This is another way you can invest in the Metaverse through buying and trading stocks. There are plenty of companies that are on the public stock exchanges and have delved into the Metaverse, with examples including Microsoft, NVIDIA, Walt Disney, Amazon, and even Facebook.
Out of these companies, Facebook is likely the most prominent option, as it is openly involved in the building and development of the Metaverse – with even the company’s founder, Mark Zuckerberg, saying that his ultimate vision for the company is for people to know it as a Metaverse company rather than a social media platform.
Dealing in Metaverse Etfs (Exchange Traded Funds)
If you do not want the uncertainty of dealing in Metaverse stocks, you can opt for Metaverse ETFs instead. Also known as exchange-traded funds, they are baskets of securities that you can trade through an exchange, similar to a stock.
The ETF will allow you to invest in companies that are making the Metaverse expand, or purchase into the fund for companies you think will contribute massively in the future. A good example of this is the Roundhill Ball Metaverse ETF that allows you to reap all the Metaverse benefits through knowing about companies like Unity Software, NVIDIA, Roblox, Microsoft, Amazon, and Tencent, as well as many others.
Virtual world tokens
These are digital tokens that have a direct link to the virtual reality space. Through owning them, you are able to amass in-game collectibles such as avatars and their outfits, as well as assets such as lands. There are numerous examples of these tokens, such as SAND (used in the Sandbox games), and AXS (used in Axie Xfinity).
Another instance is the MVI (Metaverse Index) token, which will give you exposure to a wide range of token options from crypto projects. These can be from areas such as online gaming, virtual reality, and NFTs.
Things To Consider Before Putting Your Money in the Metaverse
The Metaverse is part of technological revolutions that have happened over the years, so it is important to invest in it wisely to reap the most benefits. After all, the tech industry as a whole is unwieldy, and there are very fast changes to the winners and losers that it can be impossible to keep up and you eventually lose your money – fast.
Here are some things you should keep in mind if you want to invest in the Metaverse, regardless of the investment method you use.
Market cap
A shorthand for market capitalization, market cap is the total value in dollars of all company stock shares, or of all the coins that have been mined in the case of Metaverse crypto. In the case of crypto, you can calculate the market cap of a specific token by multiplying the price of the coin at that time by the total number of the crypto’s mined coins.
The market cap is important to examine because it will give you a general idea of the asset’s stability, especially in the volatile realm of cryptos. The same way you may think of a stronger building weathering a strong storm, is the same way a cryptocurrency with a larger market cap will withstand market forces and prove a more stable investment. On the other hand, a crypto with a smaller market cap is more likely to experience plenty of vulnerabilities in the market, and see greater losses or gains.
Other than using the price to gauge the value of a cryptocurrency, a market cap will give you a more comprehensive story and allow you to compare different tokens. Most Metaverse tokens, if not all, are based on the Ethereum blockchain, so they are considered relatively safer to invest in, keeping other factors in mind.
Volume
Volume is a metric that tells you how much of the crypto has been traded within a set period, usually 24 hours. It can tell you plenty of information about the crypto’s movement and direction, as well as help you predict the future demand and price of the token; this will also act as a very useful indicator when you want to know the future profits you can gain from a cryptocurrency. It is not the same as liquidity, although they are similar.
Liquidity is the amounts of the token available for trading activities regardless of their pricing, while volume is the total number of actual trades occurring within a specific time. The higher the volume of transactions for the specific token, the less the token prices are vulnerable to distortions, while a lower exchange volume is an indicator for low or inefficient trades.
Other factors
Other metrics worth examining ae the protocol revenue and transaction counts, which tell you the number of users, as well as their frequency of interacting with the game. However, the best way to look at your Metaverse investment is seeing it from a thematic level, then seeing whether there are signs a specific game or infrastructure will take off in the future.
Many investors agree that Sandbox and Axie Infinity are some of the most promising tokens to consider, thanks to their strong community building, marketing, and market caps. The best way to see the community building, for instance, is looking at the performance of the game on social media – especially Twitter and YouTube, where most players interact with content creators and game developers the most. Additionally, check if the developers or creators have live streams or gaming videos, where they interact directly with players, as well as whether the community welcomes and encourages new players.
FAQs
Is the Metaverse decentralized?
Yes, and the aim is for it to remain in this state, while also allowing it to be interoperable and interconnected between the gaming universes.
Is the Metaverse itself built on blockchains?
Not the Metaverse, but the tokens and digital assets used within different gaming universes – they are built on blockchains, mostly the Ethereum chain.
Conclusion
The Metaverse is an interesting investment opportunity that offers plenty of growth potential. You will find that it is a worthwhile opportunity, since it is showing patterns of increasing traction. However, due to the high risks involved and uncertain benefits, it is probably better to keep your focus on mature industries that have a better profile of risks and rewards.
