Skin in the Game: How to Invest in the Metaverse

After decades of false starts, with products like Nintendo Virtual Boy and Second Life, it seems like the metaverse is finally here. And with it, an onrush of investors looking to make their fortune in one of two ways: 

• Mining virtual gold for themselves, e.g. NFT flippers, play-to-earn gamers, virtual real estate developers.
• Selling shovels to the miners, e.g. metaverse architects, blockchain game developers, virtual clothing designers.

Whichever camp you belong to, it’s clear there are enormous sums of money to be made in these booming virtual economies. So, how do you grab this metaverse opportunity by the virtual balls (ouch)? 

Well, it’s still early days. So nobody knows which metaverse investments are going to pay off big time and afford you that virtual mansion in Snoop Dogg’s neighborhood. My advice is to just keep your eyes peeled for opportunities in any of the following asset classes.

Cryptocurrencies will give you maximum exposure to the metaverse because they power the whole damn thing. Each blockchain has a native coin (e.g. Ethereum’s ETH) and each metaverse project built on top of it might have its own token (e.g. Decentraland’s MANA). Do note, however, that cryptocurrencies carry more risk (and potential reward) than traditional assets like stocks, which we’ll get to later. 

Inside the metaverse, you can use cryptos to buy virtual land, goods, experiences, and even vote on new features to develop and how to allocate capital. But what makes cryptocurrencies a savvy investment is that their prices rise in value as they become more popular. Here are the top metaverse tokens today in order of market capitalization:

Decentraland (MANA)

Coming in at a $5.8 billion market cap, Decentraland is the #1 metaverse token at the time of writing. Its MANA token can be used to buy virtual items like avatars, wearables, names, and virtual land on the platform’s marketplace.

The Sandbox (SAND)

The Sandbox currently has a market cap of $4.3 billion and is similar to Decentraland in that its SAND token allows users to trade virtual land and other assets. If you’re trying to decide between two projects, here’s a rule of thumb: Decentraland is better suited to businesses and creators while The Sandbox is more focused on user-generated content.

Unlike Decentraland, Sandbox allows users to buy land on the popular NFT marketplace OpenSea, which is a slight advantage in terms of accessibility.

Theta Network (THETA)

Theta is a $3.6 billion video streaming network where users can share their computing resources peer-to-peer. The Theta Network has two coins: THETA, which is used to secure and govern the protocol, and TFUEL, which is used to reward users of the protocol.

Axie Infinity (AXS)

Axie Infinity is the #1 play-to-earn blockchain game today, with a $3.6 billion market cap. Gameplay is centered around collecting, breeding, battling, and trading rare creatures called Axies. Axie Infinity’s AXS is a governance token that allows holders to vote on how the Axie Community Treasury’s funds are used.

Finally, If you’d rather spread your bets across multiple metaverses instead of buying individual tokens then the Metaverse Index (MVI) might be for you. MVI is a crypto index token that is made up of the biggest Ethereum-based metaverse tokens like ILV (Illuvium), SAND (The Sandbox), MANA (Decentraland), and AXS (Axie Infinity). 

Should make for a less bumpy road to riches.

While cryptocurrencies enable payments inside the metaverse, NFTs (non-fungible tokens) are often the things being paid for. Metaverse NFTs can literally be anything, from art, avatars, clothing, and accessories to land, weapons, vehicles, and virtual concert tickets.

NFTs, much like crypto, are desired for their appreciation potential. And none more so than virtual land on the “Big Four”: Sandbox, Decentraland, Cryptovoxels and Somnium. But don’t mistake virtual real estate for a form of shelter. Outside of price appreciation, investors are buying virtual land to rent spaces, host events, and advertise to young audiences. 

Housing prices have surged in Hawaii, you say? Ainokea, virtual land sales topped $501 million in 2021. And according to MetaMetric, we’re on pace to reach $1 billion this year. The largest deal to date is Republic Realm’s $4.3 million land purchase in Sandbox. 

They used that land to develop 100 islands for sale, and recouped almost half of their initial investment at launch. Sheesh, just goes to show how much demand there is out there. 

And Republic Realm isn’t the only big player in town, everyone from Atari, Sotheby’s, Nike, Gucci, McDonald's and Samsung are rushing in.

You didn’t think FAANG and other tech players were going to sit back and let a bunch of DAOs (Decentralized Autonomous Organizations) have all the market share, did you? Of course not. 

That’s good news for most investors though, cause you probably already have some exposure to the metaverse via tech stocks like:

Meta Platforms (FB)

For Mark Zuckerberg, it’s all bets on the metaverse. And despite the general concerns around a metaverse that’s run by the people behind Facebook, Meta has got a few things going for it. The Oculus Quest 2 is the most popular VR headset at the moment, even outselling the Xbox last year by a slim margin. 

And in terms of killer apps, Meta Platforms has released Horizon Worlds and its work-oriented sister-app Horizon Workrooms. There are no usage statistics available yet, but some estimate that about 55,000 users have installed Horizon Worlds. Still, this is a drop in the bucket compared to Meta's social media apps.

Microsoft (MSFT)

Microsoft is waging its metaverse plans on two fronts: remote work and gaming. Work-wise, Microsoft is introducing Mesh — a platform where users will be able to collaborate using 3D avatars. Mesh’s most ambitious feature is Holoportation, a way to create holograms that’ll put Tupac’s Coachella performance to shame. 

But making Force ghosts a reality isn’t enough for Microsoft. They’re also planning to acquire Activision Blizzard for $68.7 billion — which could go down as the largest gaming deal in history.

As of right now, they are the two largest companies that have thrown their virtual hats into the ring. But you can check out some more metaverse stock picks here.

​​If you’re looking for broader metaverse exposure combined with lower volatility, then you’re going to want to invest in a metaverse ETF. These are baskets of stocks spread across metaverse sub-sectors like retail, cloud computing, music, gaming, semiconductors, payments, and more. 

There might only be a dozen or so metaverse ETFs to choose from today, but that number could grow into the hundreds by the end of the year. The biggest metaverse ETF in the US right now is the Roundhill Ball Metaverse ETF (METV), whose largest holdings include Nvidia (NVDA), Microsoft (MSFT), and Meta (FB).

You can snag a couple of shares of METV on Public right now.