How to Invest in the Metaverse

One of the newest areas of technology that has taken the world of cryptocurrency by storm is the metaverse. Some investors may have heard of it but don't know what it is, while others may be fully aware of it but simply don't know how to get a piece of the pie.

Whatever stage your interest in the metaverse is in, here are some ways for you to either dive in or at least stick a tentative toe in the water. Emergen Research estimates that the metaverse could become an $800 billion industry by 2028, so this is one area of technology that you don't want to miss out on.

What is the metaverse?

Some of those who have only the vaguest idea of what the metaverse is may think it's a video game, while others might think that, in a broader sense, it's the future of the internet. Both of these ideas are somewhat true, but they only scratch the surface for those who are trying to learn about the metaverse.

Facebook investors are probably aware that the company changed its name to Meta Platforms, a reference to the metaverse. The easiest way to explain the metaverse is by describing it as a sort of virtual world in which people can interact with each other and the world itself.

Facebook's name change was a primary driver of the word "metaverse" jumping into everyday conversation. Neal Stephenson is credited with actually coining the term in 1992 in his novel Snow Crash, describing it as an imaginary, "computer-generated universe." From this description, it's easy to see why Facebook would want a piece of the metaverse as it seeks to control as many aspects of our lives as possible.

How the metaverse works

Beyond Facebook, other companies were already creating their own virtual worlds in which interaction is possible. For example, video game platform Roblox has created a metaverse in which people can create their own games and interact with each other.

Microsoft's Minecraft is another example of the metaverse in video games, although the little-known Microsoft Mesh is another example of a metaverse that allows people to connect from a variety of devices, such as the HoloLens 2, other VR headsets, PCs and mobile devices.

Virtual reality (VR) and augmented reality (AR) are likely to play key roles in the evolution of the metaverse. All these examples demonstrate that the term "metaverse" can be small, as in, these individual worlds, or massive and containing all other metaverses, as in the sense of a capitalized "Metaverse."

Those who want to join any metaverse can sign in using any compatible hardware. When you sign in, you're represented by a digital avatar that you can change with every passing fad. One potential way metaverse operators will make money is by charging people for premium avatar skins or clothing.

“Soon you're taking a ‘ride’ from your sofa, visiting virtual stores to shop for designer bags, for example, in just a few minutes,” explained Colle CEO Akos Balogh. “You are saving time while also being environmentally sustainable. In a social aspect, strong communities will grow as [the] metaverse will be available for people regardless of their financial existence.”

If that sounds far-fetched, all you have to do is look at Fortnite to see how much the game rakes in on cosmetic items that don't affect the character's abilities at all. Fortnite developer Epic Games is private, so we don't know exactly how much it makes on cosmetic items; however, it did reveal in a presentation early last year that it had sold 3.3 million sets of NFL skins in November and December 2018, raking in almost $50 million on that one set of skins in just two months. Of course, some of that money went to the NFL in licensing fees, but it demonstrates just how much money these metaverse companies stand to earn on cosmetics.

Metaverse stocks

We've established that metaverse companies can be extremely profitable based solely on how much they can make on cosmetic items. So how can you invest in the metaverse? You have several options available to you. Perhaps the simplest and easiest-to-understand way to invest in the metaverse is via stocks.

Of course, the most obvious metaverse stock is probably Meta Platforms. Since its name change, Meta Platforms has launched Horizon Worlds, a metaverse platform in VR. Horizon Worlds allows users to interact with each other using their legless avatars and play games as they wander through the virtual world.

The company hasn't gained much traction with the metaverse offering, but it is trying to expand it to office workers with Horizon Workrooms. Meta Platforms has committed to spending $10 billion on metaverse development in 2022 alone. Here are some other metaverse stocks:

• Microsoft – Minecraft and Mesh address both the gaming and office/ collaboration aspect of the metaverse. Microsoft also has its own VR headset called Hololens.
• Companies with VR devices could make solid metaverse plays. Some options include: Sony with its PlayStation VR and HP with its Reverb.
• Cloud computing companies that run the back-end technological support for the metaverse, such as Amazon Web Services and Microsoft Azure. Related, data center operators like Akamai Technologies and Fastly could be options.
• Roblox – a metaverse platform for gamers and those who want to create their own games.
• Unity Software – a gaming development platform where more than 70% of the top 1,000 mobile games were made. It also offers simulation developments for a variety of industries. However, this company is not profitable yet.
• Matterport – a lesser-known metaverse play that offers virtual tours for real estate, travel and hospitality, and other areas.
• NVIDIA's Omniverse platform connects 3D worlds into a shared virtual universe. The company claims professionals "in a wide variety of industries quickly put it to work."
• Autodesk writes software used by engineers and architects to design products and buildings.
• Qualcomm is partnering with Microsoft on its metaverse.
• Immersion Corporation is an under-the-radar metaverse company that builds haptic technology, which provides touch feedback and offers plenty of applications in the metaverse.

And then we have the stocks of companies that have only a minimal exposure to the metaverse, like Nike, which has filed multiple patents aimed at dominating the virtual sneaker and clothing world. Additionally, Boeing is tapping the metaverse to improve its production capabilities. Even Walmart is quietly laying the foundation to enter the metaverse with plans to create its own NFT collection and cryptocurrency. The metaverse is such a huge trend right now that virtually any company that can stake a claim to it is doing so in whatever way they can.

Metaverse real estate

While stocks are perhaps the most accessible way to invest in the metaverse, you can also buy real estate in the metaverse. Decentraland and The Sandbox are two of the most well-known metaverse creators that are selling plots of real estate in their virtual worlds.

This digital real estate comes in the form of non-fungible tokens, which are created on blockchain networks and represent a digital asset of some sort. When you own metaverse real estate, you can rent it out, try to sell it for more than what you paid for it, or even build on it virtually.

If you build your own virtual property, you can make money on it just as business owners do in the real world. For example, Atari built its own crypto casino on the 20 parcels it purchased on the Decentraland blockchain.

Gamblers can enter that virtual casino and use Atari's native ERC20-based tokens to place bets and receive their winnings tax-free in cryptocurrency. The video game maker also announced plans to build its own virtual hotel sometime this year. It's unclear how Atari might be able to monetize a virtual hotel, but when it's revealed, the game maker could give other investors some ideas about how to turn a profit on any virtual real estate they purchase.

You can also make money in metaverse real estate just as you would in real-life real estate — by buying it and then selling it for a higher price. A piece of real estate in Decentraland sold for an astonishing $2.5 million, a testament to how much money can be made. The hope is that this particular bit of real estate will house a sort of fashion district in which real-world luxury brands will put up ads and sell digital versions of their luxury goods.

NFTs

NFTs are related to metaverse real estate, but they can represent assets other than virtual real estate. Perhaps the most common use of NFTs is to represent proof of ownership on digital art. NFTs certify that a piece of digital art is the original and either the only original or one of only a handful of originals.

"We imagine Metaverse and NFTs as the tool for the future of utility and display of digital and physical assets,” Balogh said. “You can walk through the Metaverse while acquiring products as NFTs and, with one click only, jump back into the real world and receive the physical item in real life.

Most NFTs are built on the Ethereum blockchain, and when you purchase metaverse real estate, you could display your virtual artwork within the property somewhere. Binance describes NFTs as "the bridge to the metaverse," adding that they "facilitate identity, community and social experiences in the metaverse."

The crypto exchange is embracing the combination of NFTs and the metaverse with its "initial game offering," which has captured more than $16 million in trading volume in only two weeks. Every NFT collection in the IGO was quickly sold out. NFTs can represent a wide variety of objects in the metaverse, from avatars to support for a particular project.

“Everyone will know about it in a couple of years, and it will become a part of our daily life,” Balogh added. “It will replace how we keep records and how we track ownership. How we are entertaining, learning, shopping, listening to music, and watching our favorite series.”

To buy metaverse NFTs, you will need a digital wallet that's compatible with NFTs. Then you will have to go to the platform of the metaverse you have selected to either bid on or buy outright the NFTs you want.

Metaverse cryptocurrencies

Cryptocurrencies in the metaverse are similar to NFTs, except that NFTs represent a specific item that can't be exchanged for the exact same item, while cryptocurrencies are tokens that represent digital currency within the metaverse.

Cryptocurrencies can represent metaverse real estate, like the LAND tokens in the Decentraland and Sandbox metaverses. They can also be used to purchase assets in the metaverse, like the MANA tokens used in Decentraland. For example, you can use MANA tokens to purchase LAND in the Decentraland metaverse.

Some other popular metaverse cryptocurrencies include Axie Infinity's AXS tokens, which represent the right to vote on decisions that affect the Axie Infinity ecosystem, and The Sandbox's SAND tokens, which are used for buying digital goods and services, voting and staking to earn more rewards.

These metaverse cryptocurrencies can be bought and sold on crypto exchanges like Coinbase, Binance and Gemini, so even if you don't plan on joining the metaverse, you can still profit from trading these tokens.

Should you invest in the metaverse?

Investing in the metaverse isn't for everyone, so like any investment, you should consider several things before taking the leap. All things metaverse are still highly speculative, so it is never a good idea to invest money you can't afford to lose. On the other hand, there is a chance that investors will make a great deal of money with one or even all of the options on this list.

It's not a bad idea to speak with a financial advisor who knows about metaverse investments and can help you figure out if they are right for your portfolio.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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