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Lesson 18: Invest in Metaverse

Lesson 18: Invest in Metaverse

The metaverse trend is an exciting option that can be invested in from several different angles. But it’s important to not get swept up in the emotional hype surrounding it.

Most companies are now talking about this thing called the metaverse. As an investor, you’re probably curious about how to invest in the metaverse.

The metaverse allows people to interact with each other in an online community using social media, virtual reality, and augmented reality. But the metaverse is more than just a virtual world where people can re-create themselves using an avatar of their liking. In recent years, the metaverse has been on a growing trend and everyone wants to find out how to invest.

There is quite a bit you should know before you dive in. If you want to just start investing in the metaverse, here is a quick guide:

  1. Decide how to invest in the metaversefrom in-game assets or coins that contribute to the platform’s economy to companies associated with the metaverse megatrend, there are multiple ways to invest in the metaverse.

  2. Define your strategytrading lets you speculate on the price movement; dealing lets you take direct ownership of the assets. With CAPEX.com you can do both.

  1. Take your positioncreate an account with us to start a metaverse investment.

For more info about how to invest in the metaverse, you can discover everything you need to know in this guide.

What is Metaverse?

The metaverse is a combination of future and current digital platforms that focus on virtual reality (VR) and augmented reality (AR). It is often referred to as the next frontier of the internet and a major business opportunity and financial opportunity for other sectors.

The word “metaverse” was used for the first time by Neal Stephenson in his 1992 sci-fi novel “Snow Crash.” In the book, the metaverse was described as a digital world parallel to the real one.

The term “metaverse” comes from combining the words “meta” and “universe.” It's used mainly to describe an upcoming version of the internet, and it is often associated with Web 3.0. The internet's evolution is likely to lead to the development of online 3D environments, or integrated virtual environments, that allow users to access virtual reality and augmented reality experiences.

While we might find it hard to understand what the metaverse is, social media and technology companies have already attempted to launch the first generation of metaverses. Devices like smartphones, virtual reality headsets, and digital glasses will enable users to access 3D virtual and augmented reality environments. They can connect with friends, conduct business and visit remote locations. But most of the features that the metaverse is supposed to have are still under development.

What will you find in the metaverse?

The metaverse refers to a variety of immersive digital experiences that will become available to users in the future. This will enable them to engage in diverse activities in entirely digital spaces. This could be a multiplayer virtual reality game that is accessed via a VR headset or the ability to experience integrated digital and physical spaces like location-specific digital content from users visiting via smartphones or digital glasses.

The metaverse doesn't exist as one huge digital space. It is a collection of digital spaces and experiences that are being created by companies in order to provide more immersive and realistic digital experiences. The goal is to interconnect all these spaces, but that hasn’t happened yet. There are many potential functions that the technology can offer, including augmented reality collaboration platforms that could enable better collaboration. The metaverse could also become a work productivity platform for remote workers. Real-world companies are already starting to build a version of their stores and headquarters within some of these metaverses.

Many social media and tech companies, such as Meta Platforms (formerly Facebook) and Microsoft, invest heavily in social VR to create platforms that allow people to connect with each other or work remotely.

What are the metaverses of today?

The metaverses we have today are rather like 3D gaming platforms. They are characterized by virtual worlds that continue to exist even when you're not logged in. While metaverses are represented as an augmented reality that combines aspects of the digital and physical worlds, it doesn't necessarily require that these spaces can only be accessed via AR or VR.

Fortnite is one of the most popular games that has been called a metaverse. But the term seems to be more appropriate when describing blockchain metaverses such as Decentraland or The Sandbox. Users can own virtual goods to customize their characters, which act as NFTs. They can also trade virtual real estate. As you see, the metaverse is not just one thing, but more of a jigsaw that can only exist when all the right components, integrations, and infrastructure are set in place.

How to invest in the Metaverse?

If you are interested in investing in the Metaverse, you’ll be able to invest directly by acquiring parts of it. You can purchase metaverse assets, such as in-game assets or coins that contribute to the platform’s economy.

Please note that as of 2022, there is no huge metaverse space that can incorporate all the existing virtual worlds. Instead, there are smaller multiple game-like digital worlds that offer some of the features we would expect a metaverse to have. When investing in the metaverse, make sure to thoroughly research companies and projects offering related assets.

Decentraland and The Sandbox are the two blockchain projects that come to mind when talking about metaverses. They are both built on the Ethereum blockchain and offer NFTs as in-game assets and native tokens. However, there are many others, such as Somnium Space, Crypto Voxels, and Upland.

The main three options to invest in the metaverse are:

  • Virtual land (real estate in the metaverse)
  • Non-fungible tokens (NFTs)
  • Cryptocurrency used in the metaverse

Virtual real estate

Virtual real estate exists in the metaverse, and it is limited. Each parcel of land can have a single owner at a given time. Just as in real life, things like location and size matter when trying to put a price on the virtual land that exists within the metaverse. Big name brands such as PwC, JP Morgan, and Samsung already own pieces of virtual land, and they use them for advertising and creating awareness. Even celebrities like Snoop Dogg and Paris Hilton are also metaverse landowners.

Metaverse NFTs

NFTs are often associated with NFT marketplaces and expensive transactions. Since the metaverse is mostly a virtual reality, some people might get confused about how these two – NFTs and the metaverse – are connected. Despite the novelty of both concepts, many companies have found creative and productive ways to combine them. For instance, most assets that exist in the metaverse are unique digital assets, such as land, houses, or apparel for users’ avatars.

Metaverse coins

Metaverse coins, or cryptocurrency, can be described as the currency people use in the metaverse. The coin holder can use it to pay for any item within the virtual universe, including avatar clothing and real estate. They can also sell goods and services, as well as create products. Some tokens can only be used within their metaverses. Others are available on cryptocurrency exchanges, which means you can convert metaverse coins to fiat, but also invest in the metaverse by contributing to its economy. Just like other cryptocurrencies, metaverse coins can be traded. You may compare metaverse coins by their market cap – the larger the market capitalization, the more stable your metaverse investment will be. However, like most cryptos, the price of a metaverse coin may too fluctuate dramatically and investors must be aware of the involved risks of a volatile investment.

As you’ve already noticed, there’s an abundance of virtual assets that are tied to a metaverse. But while all these metaverse investments sound promising, try to keep in mind that some platforms will become more popular than others. The concept of a metaverse is still not complete, and most guides on how to invest in the metaverse provide merely speculations. Nobody can tell for sure what mainstream adoption will look like.

While some of these metaverse projects are starting to get some traction, the assets you own in the metaverse may rise in value over time, but they also may become worthless.

Companies investing in the metaverse

There’s another way to invest in the metaverse. You may choose to invest in the metaverse by purchasing metaverse stocks, without getting involved in the metaverse or tracking down assets on NFT marketplaces. Since the topic of the metaverse has become mainstream, many public companies are investing in the metaverse.

Metaverse stocks allow investors to access companies that could benefit from the possible growth of the metaverse market.

While many of these companies try to associate themselves with the metaverse trend, only a few have invested in the metaverse – Meta Platforms (META), Snapchat (SNAP), and Nvidia (NVDA). However, the rest of them are either developing a metaverse-like environment or providing the needed infrastructure to help build the metaverse.

Formally known as Facebook, Meta Platforms (META) has an advantage in the metaverse hardware market as it launched its Oculus headsets. It takes a lot of research and infrastructure to create a digital world that allows for real-time interaction, economic activity, and immersive experiences. Meta spends billions every quarter on its Reality Labs section of the business. As Mark Zuckerberg said in 2021 when it announced the shift of focus for his company, Meta is preparing the logistical side of creating its metaverse.

Snapchat (SNAP) seems to be a social media app and less of a big player within the metaverse space, but its parent company is putting lots of effort into metaverse research. It spends hundreds and millions every quarter on research, development, and maintenance. This is its largest operating expense. The company wants to introduce virtual reality (VR) and augmented reality(AR) features to its software. That’s because top-quality VR and AR content is key to the metaverse. With the amount Snap invests in content, its technology will likely be used extensively by others in the metaverse.

Nvidia (NVDA) is another potential metaverse company to be considered. Metaverse companies are becoming more popular as they help manufacturers build a digital version of their real-life representation, or digital twins, that can be used to optimize their processes and troubleshoot issues. Of course, none of this would be possible without AI software and, of course, Nvidia is leading the way with Omniverse, its metaverse solution.

Asides from these top companies that invest in the metaverse, there are other companies that develop activities around the metaverse space worth looking for a potential investment.

Roblox (RBLX) is a popular virtual world that also has the potential to become an early version of a metaverse. Roblox's platform has hosted virtual concerts by Lil Nas X and Tai Verdes, which could indicate that virtual events are gaining more mainstream appeal. The platform was initially popular with U.S. users under 13 years old, but it has grown to be a global company that attracts an increasing number of older users. Roblox is a strong leader in the metaverse, having more than 54 million active users per day.

Unity Software (U) is the undisputed leader in 3D software. According to the company, about half of all 3D content is created using their software. One can even assume that the Unity software will be used in for the creation of future metaverse content. Because of its unique value proposition, it's reasonable to expect the company to continue to grab a significant amount of the market share.

Microsoft (MSFT), a software giant, is also ready to embark on its journey into the metaverse. It aims to create an enterprise metaverse (Microsoft Mesh) that will basically be a virtual representation of all Microsoft tools. Microsoft Mesh is a virtual collaboration tool that allows real-time collaboration between people in the virtual world. Mesh will include a collection of pre-built immersive spaces that can be used for social meetings. This will allow users to interact with one another and create avatars. Microsoft plans to purchase Blizzard, the gaming giant, which will be a key part of the creation of its own metaverse.

Funds investing in the metaverse (Metaverse ETFs)

ETFs (Exchange-Traded Funds) can be described as a basket of securities that are tradable on stock exchanges. These ETFs combine the characteristics of traditional mutual funds with shares, or they can be traded in a combination on the stock market. They are like shares. Metaverse ETFs offer investors exposure to metaverse and metaverse-related companies. These funds invest in internationally listed companies that provide services and products to support the development and infrastructure of the metaverse. ETFs are suitable investments for anyone looking to purchase a bunch of themed stocks, in this case, metaverse stocks.

The most popular metaverse ETFs are Roundhill Ball Metaverse Exchange ETF and ProShares Metaverse ETF.

The Roundhill Ball Metaverse Exchange ETF (METV) is the first metaverse ETF in the world with $863 million under management. METV was launched on June 30, 2021, and it holds some of the top metaverse stocks. The ETFs follow the Ball Metaverse Index, which is maintained by Matthew Ball. This metaverse ETF holds around 80% stock of US-based companies and 20% stock of Asian companies.

The ETF is heavily invested in gaming platforms, computing components, cloud solutions, and social networks. The top 10 holdings account for more than 60% of the fund and include Roblox (RBLX), Apple (AAPL), NVIDIA (NVDA), Microsoft (MSFT), and Unity Software (U).

ProShares Metaverse ETF (VERS) also offers exposure to companies expected to be at the center of the metaverse. This ETF was launched in March 2022, and it is dominated (over 90%) by US-based companies. The ETFs follow the performance of the Solactive Metaverse Theme Index.

The ETF’s stock allocations include semiconductors, media & entertainment, software & services, technology hardware & equipment, and consumer durables & apparel.

Over 45% of the fund is concentrated in the top seven stocks which include Kopin Corp (KOPN), an electronics manufacturer, Amazon (AMZN), Roblox Corp (RBLX), Vuzix Corp (VUZI), and Apple (AAPL).

What is the best way to invest in the metaverse?

There are two routes to investing in metaverse assets: speculating on their prices using CFDs or buying the assets in the hope they increase in value.

Trading metaverse assets using CFDs

A CFD is a contract in which you agree to exchange the difference in the price of a cryptocurrency from when you first open your position to when you close it. You are speculating on the price of the market, rather than taking ownership of the metaverse coins or stocks. If you open a long position and the cryptocurrency or stock or ETF does increase in value, you’ll make a profit, but if it falls in price, you’ll make a loss – the opposite is true for a short position.

Before you can start, you would need to open a CFD trading account.

Buying metaverse coins via an exchange

Alternatively, you might decide to buy a metaverse coin, which means that you take ownership of a portion of the digital currency outright, with the intention of holding it in a digital wallet and profiting if it increases in value.

Before you can start, you would need to open a cryptocurrency wallet and an account with a cryptocurrency exchange.

Buying metaverse stocks and ETFs via a brokerage

This means that you take ownership of a portion of the company outright, with the intention of holding it with a brokerage and profiting if it increases in value.

Before you can start, you would need to open an investing account with a broker like CAPEX.com.

With a trading account you can access all these assets together.

Each investor should research the available ways to invest in the metaverse before deciding what’s the best option for their situation. Remember that the metaverse and its assets are volatile assets, as it’s the case with crypto, and you shouldn’t invest more than you are willing to lose.

The most popular metaverse investments stocks and ETFs because these investments do not require the investors to get involved in the metaverse. Another advantage when investing in metaverse stocks and ETFs is that you can also use U.S. Dollars, instead of cryptocurrency.

You may consider investing in NFTs, cryptocurrency, or virtual land if you are already knowledgeable of the metaverse and you are comfortable with risk.

Free trading tools and resources

Remember, you should have some trading experience and knowledge before you decide to invest in Metaverse. You should consider using the educational resources we offer likeCAPEX Academyor ademo trading account. CAPEX Academy has lots of courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader.

Our demo account is a great place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how crypto trading works – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.

FAQs

How do I invest in the metaverse?

You may invest in the metaverse by buying stocks and ETFs of public companies that develop products and technology to support the metaverses. When investing in metaverse stocks and ETFs, you don’t need to get involved in the metaverse, but you might reap the rewards if the projects are successful over the long term.

Are metaverse coins a good investment?

Metaverse coins or cryptocurrencies are the native coins of a certain metaverse that allow you to trade the metaverse’s NFT assets and get involved in the economy of the ecosystem. Each metaverse has its own native coin. But these metaverse coins also exist outside of the metaverse and can be traded on cryptocurrency exchanges and trading platforms, as you would trade stocks. The metaverse coin may turn out to be a good investment if the project manages to gain popularity and attract more users to the platform.

What is the best way to invest in the metaverse?

One of the most popular ways to invest in the metaverse is by investing in metaverse stocks and metaverse ETFs. Metaverse stocks refer to the stocks of public companies that are actively engaged in creating, researching, and developing products and infrastructure to support a metaverse. Note that some of these metaverse stocks belong to companies that may develop either hardware such as virtual reality (VR) headsets, or hardware components such as semiconductors, and some offer the back-end solution for the metaverse infrastructure. Metaverse ETFs are a selection of successful metaverse stocks that are actively managed by a fund manager.

How do I invest in metaverse companies?

You can invest in metaverse companies by buying individual shares and baskets of shares (ETFs) or speculate on their prices with CFDs. With CAPEX you can invest or trade in stocks and access the most popular metaverse companies – Microsoft (MSFT), Amazon (AMZN), NVIDIA (NVDA), Roblox Corp (RBLX), Apple (AAPL) and Unity Software (U).

Should I invest in the metaverse?

Each investor should carefully assess their investment goals and decide if they want to be exposed to the risks associated with the metaverse space. Some of the most common risks linked to metaverse investments revolve around the potential future of the platform. Nobody can tell for sure which metaverse platform will win the majority of the metaverse users or what kind of hardware will they need to benefit from an immersive experience. As of 2022, we still don’t know exactly what the metaverse will look like, as we only have a handful of metaverse projects that are still in development. Only time will tell us what metaverse is the most popular one, but usually, a popular project is a good investment.

What is the best metaverse project to invest in?

As with any investment, you should always research the metaverse projects you want to invest in and asses the associated risks. Most of these existing metaverses, such as Decentraland and The Sandbox, have similar mechanisms and economies. They involve the use of NFTs and native cryptocurrencies. But the best metaverse will be the one that gains the most popularity and attracts the most users. As more people get involved in a metaverse, they create demand for the metaverse’s assets, and prices may start to go up. If you are looking to invest in a metaverse that may generate profit over time, it is recommended that you start researching the metaverse communities and see which one stands a better chance to become mainstream.

What are Metaverse stocks?

Metaverse stocks are the one of the top options for retail investors looking to get exposure to the metaverse with moderated risk. Investors who prefer the traditional market to the crypto market will find a lot of metaverse stocks to choose from.

While the best Metaverse stocks might not provide direct exposure to a platform's growth, they can offer exposure to the overall industry's growth.

What are the most popular Metaverse stocks?

Meta Platforms, formerly known as Facebook, is a great example of a metaverse stock. It is deeply involved in virtual reality, and it has plans to expand the metaverse concepts. Meta Platforms already launched Horizon Worlds, a virtual world platform where users can interact through their avatars, play games and explore virtual reality. The company has allocated up to $10 billion for metaverse development in 2022.

Other companies that offer metaverse stocks are:

  • Microsoft. The company launched Microsoft Mesh (an online virtual collaboration and communication platform), it owns the popular video game Minecraft and has recently launched a VR headset called Hololens. Microsoft Azure provides back-end support for existing metaverses.
  • Sony. The company provides VR hardware to complete the metaverse immersion – Sony's PlayStation VR.
  • HP. They recently launched the ultra-light, ultra-immersive HP Reverb G2 VR for metaverse games.
  • Amazon Web Services. The cloud computing service is a crucial component of the metaverses’ infrastructure.
  • Roblox. This is a metaverse platform dedicated to games.
  • Unity Software. The company offers software capable of providing simulation environments for metaverses.
  • NVIDIA. The company’s Omniverse platforms allow metaverses to interconnect into a single virtual universe.
  • Qualcomm. They partnered with Microsoft to create the metaverse.
  • Immersion Corp. They develop haptic technology that may prove useful for metaverses looking to provide immersive experiences.

Of course, the number of public companies that have exposure to the metaverse is rising, and the list of metaverse stocks is getting larger by the day. But most of these companies still have limited exploration. For instance, Nike created NFTs for virtual sneakers. As the metaverse trend continues, most companies will want to be a small part of it.

What are Metaverse ETFs?

A metaverse Exchange-Traded Fund (ETF), is an emerging investment instrument that allows for the purchase of a basket of stocks that are dynamically traded and managed by a dedicated fund manager.

ETFs can be compared to mutual funds because they combine a group of similar stocks or thematically organized stocks into one asset that offers more predictable returns than individual stocks. They are different because there is an ETF manager who actively trades the ETF and ensures that it maintains its maximum market value.

In the past 12 months, several metaverse ETFs were created, including Roundhill Ball Metaverse, Subversive Metaverse, and ProShares Metaverse. The difficulty of investing in metaverse ETFs is high, as they have minimum investment thresholds. It is recommended to have previous experience in the stock exchange before investing in metaverse ETFs.

What are Metaverse NFTs?

NFTs are often related to metaverse real estate, but they can also represent many other types of assets that exist in the virtual space. Perhaps the most common use of NFTs is to represent proof of ownership on digital art.

Most NFTs are built on the Ethereum blockchain, and when you purchase metaverse NFTs, you can also display your virtual asset anywhere else on the internet. NFTs are not just digital assets reserved for digital art collectors, but they are an integral part of the current and future metaverses, and they can help facilitate social experiences, and interactions, and also display identity within the metaverse.

As more crypto platforms start to incorporate NFT marketplaces, they might become a part of our daily life, a digital record of all our physical and digital belongings.

To buy metaverse NFTs, you will need a cryptocurrency wallet that supports NFTs. Then you will have to go to the platform of the metaverse (Such as Decentraland or The Sandbox) or the NFT marketplace (OpenSea, Rarible etc.) and place a bit or directly buy the NFTs you want.

What is Metaverse real estate?

Metaverse real estate, or virtual land properties, is a growing industry. Virtual landowners may trade or lend their virtual parcels and earn coins in the metaverse than can later be traded for fiat currency. When metaverses become more popular, these virtual real estate parcels might become more scarce as the demand will increase. While the virtual space is theoretically infinite, these metaverse projects only allow a finite number of virtual real estate to be created.

Decentraland is a prominent project that offers this functionality. Its 3D world contains approximately 90,000 parcels of land (called LAND). MANA is the metaverse’s native token and it can be used to buy these LANDs. But as an Ethereum-based project, Ether (ETH) may also be used as currency to purchase these land NFTs.

Some choose to build virtual businesses on their virtual property and make money – like how real-life businesses work. Atari, for example, built its crypto casino using 20 parcels that it bought on the Decentraland platforms.

Gamblers will be able to enter the virtual casino, use native ERC-20 tokens from Atari to place bets, and then receive their winnings in cryptocurrency. Atari also revealed plans to build other virtual businesses.

However, you can try to make a profit from your metaverse virtual land investment like you would in real life. You can buy it and then sell it at a higher price. One piece of property in Decentraland was sold for $2.5 million. This piece of real estate is expected to house a fashion district where real-world luxury brands can post ads and sell digital copies of their luxury goods.

What are Metaverse coins?

The metaverse's cryptocurrencies are very similar to NFTs. However, NFTs are specific items that cannot be exchanged for another item. Cryptocurrencies are tokens that are digital currencies in the metaverse.

Decentraland’s native currency is MANA, which can be used within the metaverse, but also on cryptocurrency exchanges. SAND is the native currency of The Sandbox, which is also used to purchase metaverse NFTs and virtual land, vote, and stake to earn more rewards, but it’s also used on exchanges.

These metaverse cryptocurrencies are available for purchase and sale on cryptocurrency exchanges. You can try to make a profit by trading these metaverse coins, even if you don’t want to get involved in the metaverse.

The information presented herein is prepared by CAPEX.com and does not intend to constitute Investment Advice. The information herein is provided as a general marketing communication for information purposes only and as such it has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

Therefore, Key Way Investments Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance and forecasts are not reliable indicators of future results.
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