Being a contrarian investor, I try to keep up-to-date with any price crash. I can do this by subscribing to about 20 different RSS feeds, and believe it or not, there are price crashes happening everywhere. Most of these are exaggerated or niche assets that there is no easy way to invest in them (i.e. there is no ETF in the public market to purchase, which I love to do). Today when I saw a headline for "Virtual Land Crash", I knew it would be another exaggerated clickbait. Usually, I would ignore these metaverse type assets. However, I finally decided to become knowledgeable enough about them because I am sick and tired of seeing them in my notifications all the time in recent years.
What is Metaverse Real Estate?
Metaverse is an umbrella term for any virtual world. People can log in to socialise, play games, sell NFTs, attend meetings, go to virtual concerts, and do countless other virtual activities. Like in social media, we have Twitter, Instagram, Facebook, etc.; Metaverse also has a handful of popular platforms to which you can create an account and log in.
Once you log in, you can join any game, for instance, to entertain yourself. There is a wide range of games, from casual socialising to intense shooter survival. The important thing is that the creators must register their games to a virtual land to be hosted and run. Virtual games, concerts, or other virtual activities can not happen without the land. Naturally, the landowners will collect passive income for renting out their lands.
Each pixel has a price, and you pay more to buy more land. It's as simple as that.
Current State of Metaverse
They say metaverse property dropped 18% in March 2022. But this is after a crazy hyper-inflation, so it's just a tiny correction. Here are some interesting stats from just last year:
- In the Sandbox platform, their LAND grew by 150 times. That shows you how everything can be artificially created out of thin air in this virtual metaverse.
- If you combined all four major platforms' real estate sales, it was $501M. This is expected to double to $1B.
- Metaverse real estate investments come from only about 25,000 individual crypto wallets.
This seems like a classic case of an early adapter hot trend.
Would I invest in Metaverse real estate?
No. Too early, too immature, too much research involved, too much maintenance, and ultimately, too risky. How am I going to diversify my investments? Buy a little piece of virtual land across all the platforms? Just because they are the most prominent platforms now doesn't mean they will be in the future. As far as I can tell, they all have video game aesthetics. What if there comes another platform with a more realistic touch to the graphics that allows real celebrities to start hosting their music concerts? You could probably purchase the concert ticket NFTs to tune in. Now that's a platform the entire world could potentially hop on. Just food for thought from a risk-averse investor.
That being said, since now I have some level of knowledge about these, I will continue to follow the progress and post updates on the blogs.