How to Invest in the Metaverse — Stocks or Tokens?
The expected growth of the Metaverse represents an exciting opportunity for investors to capitalize on the emerging market, but the question is: How can investors invest in the Metaverse? Through stock-market listed companies such as Facebook/Meta? Or through token-based projects developed in the decentralized space of the blockchain? We argue that the true upside potential is with carefully selected Metaverse tokens. That is also why we at 21e6 Capital argue that a Metaverse token fund or Metaverse index would make sense. Authors: Maximilian Bruckner, Prof. Dr. Philipp Sandner
When it comes to investing in the Metaverse, it is essential to carefully evaluate companies’ focus on this space. While stock-market listed companies have made headlines for their focus on the Metaverse, they may have other projects and business divisions that dilute investors’ desire for a Metaverse focus. Instead, we argue that investors should also consider token-based Metaverse projects, of which 200 are currently under development. These are specifically designed to cater to the growing demands of this space and can potentially offer higher returns than large-scale companies. In this article, we argue that the Metaverse has the potential to disrupt various domains, including communication, entertainment, education, and retail experience. It will be primarily token-based projects that have the possibility to benefit from this strongly growing domain.
The expected growth of the metaverse
The Metaverse is expected to experience tremendous growth in the near future as it presents a new frontier for the virtual world. With virtual and augmented reality technologies constantly improving, more people are becoming interested in immersive experiences, creating endless possibilities for the Metaverse. Besides this, hundreds of virtual worlds — like computer games — will emerge.
According to a report by McKinsey, the Metaverse market is predicted to reach $5 trillion by 2030. People continue to look for new ways to engage with each other in a virtual environment, in a worldwide context. This trend has also provided businesses with an opportunity to create unique experiences for customers beyond traditional e-commerce.
The expected growth of the Metaverse represents an exciting opportunity for investors to capitalize on the emerging market, but the question is: How can investors invest in the Metaverse? Through stock-market listed companies such as Facebook/Meta? Or through token-based projects developed in the decentralized space of the blockchain?
Investing in stock-market listed metaverse companies might not yield good results
When it comes to investing in the Metaverse, simply investing in stock-market listed companies may not yield the best results. While many companies exist on stock markets, not all of them have a significant focus on the Metaverse. This means that your investment may be diluted by their other ventures and business divisions.
Take the example of Facebook, now known as Meta. Although it has made headlines for its focus on the Metaverse, it still has many other projects that may affect its overall financial performance. Additionally, Facebook’s market capitalization is already high, leading to the question of whether there is significant upside potential for its share price due to the Metaverse. Therefore, it’s essential to carefully evaluate a company’s focus on the Metaverse and its potential impact on its financial performance before investing. With stock-market listed companies being valued billions of US dollars, there might not be significant upside for investors. Even more so, with Facebook/Meta as an example, there might be no upside at all.
The virtual worlds of the Metaverse will be developed outside companies but in the decentral blockchain ecosystem
The Metaverse is not only being developed by established companies but is also being developed within the decentralized blockchain ecosystem. In this ecosystem, we have already seen the first Metaverse projects such as Decentraland and Sandbox. In fact, many more Metaverse projects are under development in a token-based manner.
According to estimations, there are currently 200 Metaverse projects under development, which are expected to launch by the end of this year. Many of these projects may not survive, but some will. It is important to consider that Facebook/Meta is only developing one single Metaverse, while within the decentralized blockchain ecosystem, 200 such projects are under development. Therefore, it is essential to keep a close eye on the decentralized blockchain ecosystem and token-based Metaverse projects when considering investing in the Metaverse.
Investors should care about token-based Metaverse projects, not just about stock-market listed companies
These token-based projects driven from the decentralized blockchain ecosystem, if carefully selected, can offer immense upside potential in line with the growth of the Metaverse. Unlike large-scale companies that have only recently begun to focus on the Metaverse, token-based projects have been specifically designed to cater to the growing but highly varying demands of the expected users in this space.
Therefore, we argue that investing in token-based Metaverse projects can potentially offer higher returns than investing in stock-market listed companies. Investors should carefully evaluate the potential of each project before investing and consider factors such as the project’s development roadmap, the team behind the project, and the project’s overall adoption and traction within the Metaverse space.
What domains of the metaverse will exist? Communication, entertainment, education, retail experiences.
In our opinion, the Metaverse has four key domains: Communication, Entertainment, Education, Retail Experience (see Figure 1). In terms of communication, the Metaverse enables the creation of immersive and interactive virtual meeting spaces and new forms of communication that are not possible in the physical world. The entertainment domain of the Metaverse offers immersive virtual experiences, gaming, and virtual concerts, among other cultural events. Next, education in the Metaverse focuses on creating immersive and interactive learning environments that enable students and learners to interact with each other and educational content in new and engaging ways, facilitating lifelong learning. Lastly, The Metaverse can transform retail experience/shopping by offering personalized and interactive virtual stores, an endless aisle of products, and the ability to own and trade virtual products, providing a new revenue stream for retailers.
The Metaverse has the potential to disrupt existing companies across various domains (see Figure 2), including communication and entertainment which are currently digitally transforming a lot. With the ability to create immersive and interactive virtual meeting spaces, the Metaverse could challenge platforms such as Zoom and Facebook for remote communication. Additionally, the Metaverse’s potential to offer personalized and engaging virtual experiences could also pose a threat to streaming services such as Netflix. The Metaverse could also revolutionize the retail industry, creating virtual stores that offer an interactive and engaging shopping experience, potentially disrupting traditional retail giants like Amazon.
Communication: virtual meeting spaces, collaboration, online dating
Communication is one of the key domains of applying the future Metaverse. With the rise of virtual communication tools and remote work, the Metaverse presents an opportunity to create immersive and interactive virtual meeting spaces. These spaces can enable remote workers to collaborate in real-time, regardless of their physical location. Additionally, the Metaverse can also facilitate new forms of communication that are not possible in the physical world, such as online dating, telepresence and teleconferencing, enabling people to communicate in entirely new ways.
Entertainment: gaming, movies, tourism, concerts, and more
Entertainment is another major domain of the Metaverse. The Metaverse provides a unique opportunity for people to participate in immersive virtual experiences and create their own content. Gaming is a significant component of the Metaverse, with a growing number of games being developed using blockchain technology to enable players to own and trade in-game assets. Also, imagine movies where the user can directly jump in to be part of the virtual world of the movies. Virtual concerts, festivals, and other cultural events are also taking place in the Metaverse, offering users a unique way to connect with artists and other like-minded individuals from around the world. Digital tourism is allowing people to explore virtual destinations and experience new cultures without leaving their homes.
Education: immersive learning environments, 24/7 and worldwide on the go
Education is yet another domain of the Metaverse, with many projects focusing on creating immersive and interactive learning environments. In the Metaverse, educators can create virtual classrooms that enable students to interact with each other and with educational content in new and engaging ways. Virtual reality can be used to simulate real-world scenarios, making it possible for students to experience things that would otherwise be impossible. Additionally, the Metaverse can facilitate lifelong learning by enabling people to access educational resources and experts from around the world, regardless of their physical location.
Retail experiences: retail shopping, digital promotion and PoS
The Metaverse has the potential to revolutionize the retail industry and shopping experience. In the Metaverse, retailers can create immersive virtual stores that offer a personalized and interactive experience for customers. Shoppers can browse through products and try them on virtually, creating a unique and engaging shopping experience. Some examples are: furniture, cars, real estate — but much more. Additionally, the Metaverse can enable retailers to offer an endless aisle of products, without the constraints of physical space, allowing customers to access a wider variety of products from around the world. The point of sale (PoS) will be changing. Furthermore, with the use of blockchain technology, customers can own and trade virtual products, such as digital clothing and accessories, providing a new revenue stream for retailers. Overall, the Metaverse has the potential to transform the way we shop and experience retail, creating a more accessible, personalized, and engaging experience for consumers.
What are examples of token-based metaverse projects?
Decentraland is an open-source Metaverse project that was launched in 2017. It is built on the Ethereum blockchain, and users can buy, sell, and build virtual land within the Metaverse using the project’s native token, MANA. Decentraland allows users to create and experience virtual worlds, games, and applications using a range of creative tools. Users can also interact with each other in real-time and participate in various social and economic activities. Decentraland has gained significant traction in the Metaverse space and has established itself as one of the most prominent Metaverse projects to date. Yet, it also just acts as a prototype: not many users are there yet, and graphics need improvement.So far only a few projects exist, large user numbers are not existing, graphics need to be improved. But there are 200 more projects under development, all based on blockchain technology, tokens and developed within the decentral ecosystem. That is also why we at 21e6 Capital argue that a Metaverse token fund or Metaverse index would make sense.
Sandbox is another Metaverse project that has gained significant popularity in recent years. Like Decentraland, Sandbox is a blockchain-based virtual world where users can create, share, and monetize their virtual experiences. The project uses non-fungible tokens (NFTs) to represent virtual land and assets, allowing users to truly own and control their virtual property. Sandbox has also partnered with a range of prominent brands and entities, including Atari and Square Enix, to create unique virtual experiences and games within the Metaverse.
In addition to Decentraland and The Sandbox, there are several other examples of Metaverse projects that are being developed within the decentralized blockchain ecosystem. One of these is CryptoVoxels, a virtual world built on the Ethereum blockchain where users can create and trade unique, blockchain-based virtual real estate. Another example is Somnium Space, a blockchain-based virtual world where users can purchase virtual land and build anything they want, from homes to shops and galleries. Additionally, there’s also Upland, a blockchain-based game that uses real-world maps to create a virtual world where users can buy, sell and trade virtual properties.
These projects showcase the potential of blockchain technology to create immersive, decentralized and user-driven Metaverse experiences. So far only a few projects exist, large user numbers are not existing, graphics need to be improved. But there are 200 more projects under development, all based on blockchain technology, tokens and developed within the decentral ecosystem. That is also why we at 21e6 Capital argue that a Metaverse token fund or Metaverse index would make sense
Conclusions & Outlook
The Metaverse is an exciting opportunity for investors to capitalize on the emerging market and potentially reap significant returns on their investments. The Metaverse is expected to experience tremendous growth as it presents a new frontier for the virtual world. The virtual worlds of the Metaverse will be developed not only by established companies but also within the decentralized blockchain ecosystem. While investing in stock-market listed companies may not yield the best results, investing in token-based Metaverse projects can potentially offer higher returns.
Investors should not only focus on stock-market listed companies but also pay close attention to token-based Metaverse projects. The Metaverse has the potential to disrupt existing companies across various domains, including communication and entertainment, education, and retail experience. At 21e6 Capital, we therefore argue that a Metaverse token fund or Metaverse index would make sense.
21e6 Capital is a Swiss investment advisor, connecting professional investors with tailor-made crypto investment products. We focus on risk management of crypto and digital asset exposure for family offices and institutional investors. Our expertise in crypto asset management stems from a team combining decades of experience in traditional financial services with native and in-depth knowledge in digital assets.
21e6 Capital has analyzed over 1,000 crypto hedge funds across the world and condensed them into a selection that can yield crypto-exposure with minimized downside risk. Our risk management solution, provided by OpenMetrics Solutions, is also trusted by the largest Swiss pension funds.
The 21e6 Capital team builds upon strong academic roots with a track record of leading crypto asset and decentralized finance (DeFi) publications and research, ensuring state-of-the-art crypto investment solutions for professional investors, family offices and asset managers.
Prof. Dr. Philipp Sandner has founded the Frankfurt School Blockchain Center (FSBC). From 2018 to 2021, he was ranked among the “top 30” economists by the Frankfurter Allgemeine Zeitung (FAZ), a major newspaper in Germany. Further, he belonged to the “Top 40 under 40” — a ranking by the German business magazine Capital. He has been a member of the FinTech Council and the Digital Finance Forum of the Federal Ministry of Finance in Germany. He is also on the Board of Directors of FiveT Fintech Fund, 21e6 Capital and Blockchain Founders Group — companies active in venture capital financing for blockchain startups and crypto asset investment management.
Maximilian Bruckner is Head of Marketing & Sales at 21e6 Capital AG. Prior to this, he was engaged as Executive Director of the International Token Standardization Association (ITSA)where he focused on research and classification of crypto assets according to the International Token Classification (ITC) framework. He was heavily involved in the creation of the world’s largest token database for classification and identification data on tokens (TOKENBASE). Maximilian did academic research in close consultation with Prof. Dr. Philipp Sandner. You can contact Maximilian via e-mail at firstname.lastname@example.org to request more information on 21e6 Capital AG or ask any questions regarding this article. You can also follow Maximilian on LinkedIn( https://www.linkedin.com/in/max-bruckner/) to stay up to date.
This article is an informational document and does not constitute an investment recommendation, investment advice, legal, tax or accounting advice or an offer to sell or a solicitation to purchase any securities and therefore may not be relied upon in connection with any offer or sale of securities. The views expressed in this letter are the subjective views of 21e6 Capital personnel, based on information which is believed to be reliable. Any expression of opinion (which may be subject to change without notice) is personal to the author and the author makes no guarantee of any sort regarding accuracy or completeness of any information or analysis supplied.