The metaverse strikes back

Even the harshest critics cannot deny the exponential growth opportunity for Metaverse tokens.

Even the harshest critics cannot deny the exponential growth opportunity for metaverse tokens. Not only are they not completely governed by the same forces behind popular cryptocurrencies, but as time progresses, it’s increasingly difficult to write off the metaverse as a mere ‘fad’ as investors begin to understand where the industry can genuinely lead. With the metaverse tokens and this recent price action, there is more than meets the eye. 

Reflecting this sentiment, metaverse tokens have had a flying start to 2023. In January, Decentraland (MANA) rose by a gleaming +130%, while Sandbox (SAND) and other heavyweight metaverse tokens have joined the rally and risen from +70% onwards, overshadowing the Bitcoin (BTC) and Ethereum (ETH) gains of 40% and 38%, respectively. 

Two key drivers explain this metaverse uptrend: firstly, due to strong community engagement, partly driven within the crypto media, and secondly, by virtue of a speculative vision ushered in as the business potential of metaverse tokens has become more apparent than just a year ago.

The recent rumors of Apple’s exciting new VR headset are likely some of the critical drivers for the price spike. Apple will not likely let any interaction with the device from outside its own ecosystem. Nevertheless, their adoption of metaverse technology in response to competitors Meta, Microsoft and Sony will surely strengthen the metaverse space by providing the valuable resources needed to access them.

As household brands and franchises like Apple continue to dip their feet into Web3, hot topics within the metaverse are reported across the crypto, Web3 and mainstream media. The Sandbox, a virtual world that allows players to build, own and monetize their gaming experiences, stole the limelight when it recently debuted the official Puss in Boots Experience, which enables users to accomplish exciting objectives in the Metaverse and win exclusive NFTs.

Without a doubt, positive industry news has played a role in the recent metaverse token spike.

Other market forces are the driving force behind the unrivaled gains of Decentraland (MANA) the cryptocurrency used by the 3D virtual world platform to purchase goods and services. This particular price ascension was further ignited after Decentraland sold a LAND Estate for 75.28 ETH in late January. Subsequently, this sparked a 50% increase in trading activity, leading to a 5.5% rise in Decentraland’s land cap to bypass 250k ETH. This comes after the browser-based platform unveiled its manifesto for 2023, which includes plans to improve monetizing its user-generated content, upgrade performance and work on an enhanced identity system. 

Unlike conventional crypto, metaverse tokens are purposed for multiple use cases within their native ecosystems, such as buying virtual land, avatars or NFTs. The Decentraland uptick is a prime example of how engagement within said ecosystems can impact the price of a metaverse token. Therefore, a critical factor in explaining how the metaverse tokens have outperformed Bitcoin and Ethereum is that they can be less reliant on the price action from exchange platforms like Coinbase or Binance. These tokens have the added factor of user participation within the Metaverse world, which depends on the users’ creativity to build, grow and contribute to the platform. This all provides a different dynamic that exchanges cannot replicate with cryptocurrency not integrated within a popular virtual world.

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Additionally, as the metaverse industry has developed over the past year, new updates and external ecosystems have formed for each project, which has led to vast new opportunities for passive income as a result of recent innovation. Tokens such as Sandbox (SAND) have brought extraordinary value to LAND owners in The Sandbox by following the lead of Ethereum and moving to a proof of stake mechanism. In comparison, the ecosystem surrounding Decentraland (MANA) now allows staking through earning services offered by some exchanges. These services allow users to earn cryptocurrency rewards. These factors have added to the positive market sentiment leading up to the recent uptrend. 

Last year Gartner predicted that by 2026, 25% of the population would spend at least one hour in the Metaverse for work, shopping, education, social and entertainment activities. From a macro perspective, it is evident there is mounting sentiment for further growth as the fledgling industry turns away from its infancy.

The metaverse token market cap sits at just $16 billion at the time of writing, in contrast to the total crypto market capitalization, which sits at $1.09 trillion at the time of writing. For perspective, the metaverse token market cap only makes up a little over 1% of this total. For this reason, an underlying driving force behind the recent token spike is that the industry has become more of a visible and legitimate investment opportunity compared to just a year ago; an illustration of this is the bulky tech giants that continue to invest despite the bear market.

Despite the recent metaverse token spike, this sentiment is still highly speculative and susceptible to change. The driving force of this uptrend isn’t just the assumption that businesses and metaverse communities will spur further momentum. Moreover, it’s also banking on the prediction that as we dive deeper into the digital age, more of our time working, communicating and downtime is to be spent in virtual reality. Both facets need continued momentum for the metaverse tokens to perform consistently long term.

The metaverse industry has so far relied too heavily on catering to the crypto-native Web3 audience. The danger of preaching to the converted doesn’t help metaverse projects or the industry in the long run. To ensure further growth within the metaverse space, companies should remember to focus their efforts on attracting new users who are not necessarily up to speed on the latest technologies. 

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Sheraz Ahmed is the managing partner of STORM Partners and co-executive director of the Crypto Valley Association.

This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.

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