London: Global markets have had a shaky start to the year as the prospects of tighter monetary policy prompt investors to ditch risky assets – but the burgeoning world of ‘metaverse’ investing runs on its own timeline.
Metaverse-related assets, such as currencies that can be used in virtual worlds and NFTs that represent virtual land, suffered only a minor blow as risk appetite declined in January, while the broader digital goods market has seen volumes soar.
Facebook changing its name to Meta Platforms Inc proved to be a bigger driver for investment in the metaverse than broader financial market conditions.
Non-fungible tokens (NFTs) surged in popularity last year and this growth shows no sign of slowing, with sales in the largest market, OpenSea, hitting a record $5 billion in January, even as the tech-heavy Nasdaq largest monthly decline since 2018.
NFTs are a niche crypto asset that uses blockchain to record ownership of digital files such as images and video. Some enthusiasts see them as an integral part of a largely hypothetical version of the Internet called the “metaverse,” where assets such as virtual land, clothing, and artwork can be held by cryptocurrencies.
A small number of enthusiasts have driven volume growth. In the past month, according to market tracker NonFungible.com, there were approximately 400,000 active wallets in NFT markets on the ethereal blockchain — and one person can own multiple wallets, making volume data an unreliable proxy for demand.
METAVERSE TOKENS
When the prospect of US Federal Reserve rate hikes startled investors in late January amid rising inflation rates, bitcoin also fell – contrary to the theory that the highly volatile cryptocurrency could act as a store of value, like gold.
Blockchain-based metaverse worlds such as The Sandbox and Decentraland have their own cryptocurrencies, which players can use to purchase assets such as land or “wearables” for their avatars.
Popular metaverse-related coins, Decentraland’s “MANA” and The Sandbox’s “SAND” are highly volatile, but seem driven more by business sentiment around the metaverse than central banks.
While they fell in line with other risky assets, this move was small compared to the massive spike they saw in late 2021 after Facebook’s name change, sparking a new wave of interest in metaverse-related investments.
Metaverse coins have seen astronomical growth during the pandemic: The coin “AXS” from the game Axie Infinity is up about 3,000% over the past year, at $61.03 compared to $1.97 this time last year, according to CoinGecko -data.
VIRTUAL REAL ESTATE
How much is a piece of virtual land worth?
The price of an NFT representing a unit of land in blockchain-based virtual worlds has also risen last year, with investors comparing the battle for a well-placed piece of land to the way people bought domain names in the early days of the internet.
But since the end of 2021, price growth has slowed down. The average price of a plot of land in Decentraland last week was $18,268, according to NonFungible.com, compared to the peak of $21,405 in November last year.
“There are more virtual land buyers this year than in the past, but with high ‘sell’ pressure and a lot of oversold buying last year, selling for a profit in today’s market is challenging,” said a longtime NFT investor known as Trislit, who estimates his virtual land portfolio is worth about $900,000.
The number of NFT land sales has fluctuated between about 1,000 and 2,000 per week so far this year.
“Due to the drop in prices, the liquidation value of my portfolio has dropped quite a bit,” said Trislit. “But since I don’t plan to sell anytime soon, I haven’t felt the blow personally.”
