How to invest in the metaverse

Aside from its promising market spectrum, large companies and professional VC and PE firms are increasingly pouring capital into the metaverse. This year Microsoft made its biggest ever acquisition of $70 billion, acquiring Activision Blizzard as a move into securing a major spot in the metaverse. Meta (Facebook’s new name) has invested $10 billion to acquire and develop its hardware and software offerings with a strong focus on virtual reality (VR) capabilities within the metaverse.

So, with VC and PE investors allocating capital to the metaverse, maybe you ought to find out more about the metaverse and see if you ought to as well.

The concept of a huge global on-line virtual world offering a highly immersive experience has caught the attention of many industries which, as a result, are already allocating $billions into the metaverse. How is it possible, then, to gain exposure to some of the investment opportunities this fast new growing market is offering? Earlier this year, the metaverse market was valued at around $61.8 billion and is expected to reach $426.9 billion by 2027 according to MarketsandMarkets.

But of course, different researchers from various notable organisations offer contrasting estimates of what to expect from the metaverse market. For instance, Emergen Research projects that the metaverse could become an $800 billion industry by 2028. Another article from Bussiness2Community says the niche may climb up to $5 trillion by 2030.

Amid these varying values, one thing for certain is that there is an expected exponential growth in this simulated reality market. It is also worth bearing in mind that the metaverse is already impacting a wide range of businesses and industries and, contrary to popular belief, it is not simply about on-line gaming. As the chart below indicates, those businesses already adopting the metaverse intend to spend a significant part of their future digital investment into the metaverse.

Current metaverse adoption:

Source: McKinsey

With the exception of its promising market spectrum, large companies are increasingly pouring capital into the metaverse. To name just a few, Microsoft, Facebook (rebranded ‘Meta’ in 2021), Google, Nvidia, Roblox and Qualcomm are some of the earliest investors in this emerging technology. In January, Microsoft made its biggest ever acquisition of $70 billion by acquiring Activision Blizzard as a move into securing a major spot in the metaverse.

Meanwhile, Meta has invested $10 billion to acquire and develop hardware and software that will provide virtual reality (VR) capabilities – a key component in the metaverse. It is not merely some of the world’s leading tech firms which are investing in the metaverse. McKinsey recently released a report called ‘Value Creation in the Metaverse’, claiming that venture capital (VC) and private equity (PE) fund managers had allocated $13billion to the metaverse in 2021 and, by the middle of 2022, had already invested $7billion.

In 2021, merger and acquisition activity was $44billion and halfway through 2022 it was $90-$100billion. As a greater number of major companies, asset managers and individual investors invest in this industry, it is neither a surprise nor strange that you may wish to get involved as well. After all, with such tremendous potential and its massive growth the metaverse provides many investment opportunities, so how can you invest in it? 

Metaverse games

If you are cognisant of the gaming world, you would have noticed its rapid growth over the past years. This exponential advancement is driven by notable metaverse games, such as Decentraland and The Sandbox. There are also smaller projects constantly streaming into the metaverse, aiming to leverage the success of those projects existing before them.

These metaverse games provide an immersive environment where players not only have fun but can also earn rewards through the play-to-earn mechanism. One such project, Battle Infinity, incorporates a fantasy sports league into its metaverse and creates a way for sports fans and players to earn rewards for skilled gameplay. 

Metaverse stocks

One of the best ways to invest in the metaverse is through metaverse stocks. Investors who prefer to operate in the equity market rather than the crypto market capitalise on investment opportunities with the stocks. Investing in metaverse companies is an easy way to diversify your portfolio without getting overexposed to a particular project.

It offers indirect exposure to a specific project but direct exposure to the industry’s growth. Furthermore, unlike buying crypto, the process of purchasing stocks is often much more beginner friendly. There are currently many metaverse stocks to invest in, examples being Meta, Nvidia, Roblox, Nike, and others.

Metaverse cryptocurrencies

Metaverse cryptocurrencies are the native tokens of metaverse-based projects. These tokens can be used for various tasks, including transactions, staking, and governance. The list of use cases of metaverse crypto coins is inexhaustible.

They can represent metaverse real estate such as the LAND tokens in Decentraland metaverse. In the same metaverse, MANA tokens are used to purchase assets; for instance, MANA tokens can be used to purchase LAND.

Other popular metaverse cryptocurrencies include Axie Infinity’s AXS token which is the native and utility token of the ecosystem, and Sandbox’s SAND token which is used for purchasing purposes, voting and staking in the Sandbox metaverse. Whether or not you commit to joining a metaverse, you can still benefit from trading its tokens since metaverse cryptocurrencies are listed on crypto exchanges.  

Metaverse NFTs

Some of the best NFTs appearing over time have been part of metaverse-based projects. Aside from their valuable characteristics (another factor that renders NFTs attractive from a metaverse point of view) is that they can provide true ownership of in-game assets.

Battle Infinity (one of the most fascinating NFT projects) has Battle Market, a dedicated NFT marketplace within its ecosystem where players can buy, sell, and trade in-game items. IBAT, the game’s native token, is the utility currency through which assets such as a new outfit for an in-world avatar can be purchased. Using this token, Battle Infinity allows players to buy plots of virtual land, structured as NFTs.

Metaverse real estate 

Virtual real estate has emerged as one of the exciting highlights among investment opportunities within this growing sector. Many metaverse platforms provide environments where you can build and trade assets and intuitive experiences, similar to how Battle Infinity was previously described.

Decentraland is a three-dimensional world comprising of approximately 90,000 plots of 16m x 16m land parcels which can be purchased using Decentraland’s native token, MANA. Just like in real life, the value of plots varies based on their location. For instance, in 2021, some plots of land were valued at over $13,000 because they were located near Decentraland’s ‘Genesis Plaza’. Likewise, as you can buy land, you can also rent land.

This is a way for virtual landowners to generate money, as they lease their lands to others at a cost. Buying and reselling of lands at a higher price is also permitted. Earlier this year, an article on CNBC stated that metaverse virtual land sales had reached $500 million in 2021 and, according to 101 Blockchains, Snoop Dog and other celebrities are developing virtual properties on the Sandbox metaverse.  

So, if you need further motivation to try and unearth the next Apple, Google, or even Bitcoin, you may wish to take a couple of moments and read “Toys, Secrets and Cycles: Lessons from the 2000s”, written by Chris Dixon who summed up the current investment landscape, by saying: “the same creative patterns that happened in the 2000s live on today, driven by enthusiasts who see possibilities where others don’t. You just need to know where to look. My belief is that the best place to look is crypto and web 3. …. today’s negative financial sentiment most closely resembles 2008. If we are headed for a prolonged downturn, there are some tactical lessons from the 2008 era, namely preserving capital and staying focused on your long-term vision. The strategic lesson is to keep your eyes squarely focused on the product cycle. Things that look interesting to smart people usually do so because they are rich with product possibilities. These possibilities eventually become reality. Toys become must-have tools. Weekend hobbies become mainstream activities.”

There are many ways to invest and capitalise on a vast array of opportunities in the metaverse such as running an e-commerce business, buying a metaverse-specific cryptocurrency, hosting events, buying an exchange-traded focused fund, etc.

There is a possibility of making a great deal of money through investing in the metaverse, however, like any investment, you need to do your research and remember many metaverse investments can be illiquid and volatile.

Investing in the metaverse via a fund that offers diversification may well also help you sleep easier at night knowing a professional is keeping an eye on your portfolio for you.