Retail Investors in the Metaverse — Is It Worth It?
The metaverse is the current buzzword of the tech world — a nebulous, hard-to-define playground for developers, designers and dreamers. While primarily used as a virtual world for gamers, the metaverse has been rapidly transforming into a place where real economic transactions occur.
This promise of an additional world where commerce can occur has clearly caught the attention of corporate America, which has been dumping time and money into developing and expanding the metaverse. But what exactly is the metaverse, and is it worth an investor’s time? Let’s explore.
What Is the Metaverse?
The metaverse is a vague, emerging technology that’s likely to be redefined and even renamed over time. But for now, the metaverse is a general term used to describe the coming expansion of virtual and augmented reality, supplemented by a digital economy and incorporating everything from cryptocurrency and mobile gaming to social media and 5G.
In the simplest terms, you can think of the metaverse as a vast “parallel universe” that exists in three-dimensional cyberspace and incorporates every type of buzzy technology you can imagine. In the metaverse, you’ll be able to create your own persona that can buy and sell real estate, clothes or other goods that you can buy in the real world. In a sense, the metaverse is like a virtual reality version of the real world, accessed through gaming-type devices and headsets but using actual currency to buy and sell items.
How Valuable Is the Metaverse?
There’s no quantifiable value for the metaverse as a whole, but there have been notable sales of real estate in the metaverse that give a clue as to just how much money may be involved. According to CNBC, someone paid $450,000 to be famed rapper Snoop Dogg’s neighbor in the virtual world known as the Sandbox. Yet, just like in the real world, real estate in the metaverse is skyrocketing as well. Andrew Kiguel, the CEO of Tokens.com, says that digital real estate prices have jumped 400% to 500% in just the past few months.
So, what’s the future growth potential of the metaverse? Bloomberg Intelligence sees a value of $800 billion as rapidly as 2024, while Morgan Stanley analyst Brian Nowak sees a value of as much as $8 trillion. No matter how accurate either of these estimates are, it seems apparent that the metaverse offers the potential for explosive growth in the near future.
Is This a Fad?
The metaverse is likely to have staying power, based on the comments and actions of the biggest players in the tech industry. Microsoft CEO Satya Nadella, for example, has said that the metaverse is the future, and that the technology to bring digital representations of people will change the world. Facebook is so convinced of the future of the metaverse that it actually changed its official company name to “Meta.” According to Meta CEO Mark Zuckerberg, “… the metaverse is the next frontier just like social networking was when we got started.”
Although no one can accurately predict where the metaverse will head — just like in the early days of the internet — the backing of the world’s greatest technology companies demonstrates that the metaverse, in some form, is here to stay.
Risks and Rewards of the Metaverse
The metaverse carries the same risks and rewards as any emerging technology. As no one is sure exactly where the metaverse is heading, specific bets are likely to be of the “boom or bust” variety. For example, if you buy virtual land in the metaverse, you may reap long-term rewards as an early adopter. However, land in the metaverse might just as easily be deemed worthless in the future, as it has no intrinsic value at the present time, and it may be supplanted by a different technology in the future. In other words, even if the metaverse succeeds as a whole, it could be a risky proposition to pick a winning investment.
The safest way to get exposure to the metaverse in its early stages is to buy shares of companies that are devoting time and personnel to its development, such as Meta. Roblox is perhaps the company with the most current exposure to the metaverse, as it creates not just immersive video games but software and tools for developers to create digital worlds. But many other companies, from Microsoft to Nvidia, stand ready to gain a piece of the metaverse pie as well. Talk with your financial advisor to see which option might be best for you.
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