A Beginner’s Guide to Invest in The Metaverse

Talia Lee-
July 04, 2024

The future of the internet is poised to include virtual worlds where human interaction transcends physical limitations — welcome to the era of the metaverse. Analysts project these digital realms to become a significant investment opportunity in the coming years.

While still in its developmental stages, the metaverse has the potential to transform sectors ranging from e-commerce to social media and even real estate. As the user base for these virtual environments expands, so does corporate interest in leveraging this emerging trend. For instance, Facebook recently rebranded as “Meta” and has allocated over $40 billion since 2020 towards developing the metaverse.

This guide aims to provide insights into what the metaverse entails and how individuals can potentially benefit from its technological advancements.

Over the past few decades, internet technology has transformed our world, granting unrestricted access to information and expanding our social interactions. The next technological leap promises to be even more immersive.

Advancements in computing power, faster internet connectivity, and technologies like artificial intelligence and machine learning enable tech companies to create virtual environments. These spaces aim to provide users with a sense of presence without physically leaving their surroundings. Through holograms powered by virtual reality headsets and other devices, companies such as Meta envision a future where people can engage in a wide range of activities. Meta CEO Mark Zuckerberg described this vision in a 2022 video, envisioning opportunities to “do almost anything that you can imagine.”

In this virtual world, users can teleport as avatars to digital environments to work, play, shop, exercise, learn, and participate in most aspects of life digitally. They can recreate real-life settings such as home or office décor while incorporating high-fidelity graphics like a virtual beach in Hawaii. This blend of real and imaginary elements creates an idealized version of reality within the metaverse, according to Meta.

“When you attend a meeting in the metaverse, it will feel like you’re physically present in the same room, making eye contact and sharing a sense of space, rather than just staring at a grid of faces on a screen,” explains Zuckerberg.

This immersive experience extends across all virtual interactions. For instance, augmented reality could allow a schoolteacher to transport students to ancient Rome or the depths of the Amazon rainforest, enhancing educational experiences beyond physical constraints.

Virtual worlds are not a new concept, with companies like Nintendo, Decentraland, The Sandbox, and Roblox (RBLX) having operated virtual reality spaces for years, collectively attracting millions of users. However, for major tech firms, the ambition now is to unify these communities into a cohesive metaverse, aiming to tap into a multi-billion-dollar opportunity.

Investment firm Grayscale projects that global revenue from virtual gaming alone could exceed $400 billion by 2025, up from $180 billion in 2022, marking a substantial 122 percent increase.

“Our social lives and gaming are converging, creating a large and rapidly growing economy for virtual goods,” noted analysts at Grayscale in a research report.

Participants in the metaverse economy, including content creators, utilize cryptocurrencies to trade virtual goods as non-fungible tokens (NFTs), enabling ownership and transfer across different digital experiences. This innovative approach has spawned a new free-market economy native to the internet, which can also be monetized in the physical world.

Major corporations are increasingly entering this space. Sotheby’s (BID), for example, reported $100 million in NFT sales in 2021 and launched Sotheby’s Metaverse, a virtual gallery in Decentraland showcasing digital artworks. Likewise, Nike expanded its digital footprint by acquiring RTFKT, a virtual sneaker company, in December 2021. High-fashion brands such as Givenchy, Gucci, Dolce & Gabbana, and Adidas have hosted virtual fashion shows in the metaverse.

Furthermore, pop stars like Ariana Grande and Lil Nas X have performed virtual concerts in the metaverse, drawing millions of global fans. The burgeoning metaverse economy has also spurred investments in virtual real estate, with some investors purchasing “digital land” on platforms like The Sandbox for millions of dollars, hoping to reside near virtual celebrities such as rapper Snoop Dogg.

For many individual investors, exposure to the metaverse may already be part of their portfolio, given the involvement of numerous large U.S. public companies actively investing in or participating in the technology.

In October 2023, Microsoft (MSFT) made headlines by acquiring Activision Blizzard for $69 billion, marking one of the largest gaming deals in history and a significant bet on metaverse expansion. Microsoft CEO Satya Nadella emphasized, “Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms.”

Other notable public companies like NVIDIA (NVDA), known for its semiconductor technology powering computer graphics, are also poised to influence the metaverse’s growth. Similarly, software makers like Autodesk (ADSK) and Unity Software (U), which enable architects and designers to create 3D models, along with cloud-technology provider Fastly (FSLY), are prominent players in this evolving space.

For investors seeking broad exposure, the Roundhill Ball Metaverse ETF (METV) offers a straightforward investment avenue focused on metaverse-specific stocks. With approximately $386 million in net assets under management and an expense ratio of 0.59 percent, the ETF provides efficient access to this emerging sector.

Furthermore, many investors already hold cryptocurrencies, NFTs, and other digital assets integral to the metaverse ecosystem. However, these investments often carry higher risks and volatility compared to traditional holdings. Therefore, it’s crucial to assess your risk tolerance, conduct thorough research, and be prepared for potential losses. Diversifying your portfolio across various asset classes remains a prudent strategy for most investors aiming to navigate the evolving landscape of the metaverse and digital economy.

The metaverse represents a rapidly expanding technology poised to transform industries and create fresh investment prospects. Individual investors may already have exposure to the metaverse through investments in major tech firms or holdings in cryptocurrencies and NFTs. Nevertheless, thorough research and a careful assessment of risk tolerance are essential before delving deeper into this burgeoning market. With a promising future ahead, the evolution of the metaverse warrants close attention as it unfolds.

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