Rise of the Metaverse: Investors Spending Fortunes Buying Virtual Real Estate in Decentraland
In just the past two week, over $100 million in metaverse land has been sold. According to some industry insiders, the opportunity in metaverse virtual lands could increase 200-fold over the next 16 months.
The idea of buying and selling virtual real estate was considered a niche, even eccentric activity without any economic value. Late this year, it evolved into a real commercial opportunity following Facebook’s rebrand to Meta and its seemingly pivoting towards the development of the metaverse, interconnected 3D worlds that are seen as the next evolution in our online experiences. That Facebook move precipitated a robust trade in non-fungible tokens. Nowhere is this more apparent than in the metaverse worlds. where artists are able to host concerts, brands can advertise, businesses can host meetings, and users merchandise items. In the past few months, the metaverse has seen record transaction volumes running into hundreds of millions of dollars.
In the past week alone, more than $100 million worth of metaverse land was sold as NFTs. This occurred in the leading metaverses such as Sandbox (SAND), Decentraland (MANA), Somnium Space, and CryptoVoxels, according to DappRadar data.
Why are Virtual Lands Suddenly So Valuable?
Last week saw a plot on Decentraland being sold for $2.4 million and another on Axie Infinity for $2.3 million.
There is a sudden boom in virtual lands with some deals often running into millions of dollars. For some, it appears like these deals are overly speculative and unsustainable, even in the short run.
However, major players in the industry believe that the trend is early enough and that buying virtual lands is almost like buying pixels just as in the early days of the internet, in the 1990s. Ownership of the virtual lands in the metaverse could be priceless if one snaps up prime real estate that could eventually grow into something bigger when demand increases.
One of the virtual realms seeing a lot of activity lately is Decentraland, whose native token MANA has surged 34% in the past month and a whopping 4,493% in the past year, according to CoinGecko.
In the medium to long term, it is expected that these virtual realms will attract tens of millions of users who will be signing up to try out their experiences and this is where holding a prime virtual land will be priceless.
Decentraland has seen a 30-fold increase in users, from 16,000 at the beginning of the year to 384,000 at the end of November.
Beyond the hype, the multi-million-dollar price target of the metaverse lands is also being driven by scarcity. Decentraland, for instance, has more than 90,000 parcels of land, each of which consists of 50 feet by 50 feet.
Huge Potential in the Metaverse
Just like in commercial real estate in the real world, the value of virtual lands in platforms such as decentraland depends on factors such as location, ‘foot’ traffic, its proximity to downtown, size of the plot as well as in the value of past transactions.
These prime virtual lands will become lucrative assets as more people join the metaverse. Owners can host concerts in them, put fashion shows or rent out these spaces to blue-chip brands that can leverage them to showcase their NFT creations. According to the digital asset management company Grayscale Investments, the metaverse could potentially become a $1 trillion annual revenue opportunity in the coming years.
Yet, there is something of a bubble in the current virtual lands craze. In spite of the industry currently seeing multi-million-dollar sales, some crypto investors only see it as a passing fad and that the metaverse land sales boom we are seeing won’t last long.
Yet, some see it as a normal bubble just like the housing bubble. Platforms such as decentraland are seen as having enough players and eyeballs to warrant huge transactions. There is a speculation frenzy and the FOMO is driving more money and users into these virtual lands but the metaverse is real at the same time, very emblematic of the opportunities set to come as more users spend time online. We are already seeing this with NFT sales where some users are willing to spend thousands of dollars on different digital creations. In the future, it won’t be unreasonable for someone to spend thousands of dollars on virtual shoes or virtual Gucci bags as these will still be the new status symbols in immersive virtual worlds where people will spend most of their time.