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The metaverse represents the future of the internet, offering virtual worlds where individuals can interact without the constraints of physical space. Analysts predict that these virtual environments could present a significant investment opportunity in the coming years.
While the metaverse is still in its developmental stages, the technology has the potential to transform various sectors including e-commerce, social media, and real estate. As the user base for these virtual environments expands, so does the interest from businesses looking to leverage this emerging trend. For instance, Facebook recently rebranded itself as “Meta” and has invested over $40 billion since 2020 in developing the metaverse.
This guide aims to provide insights into what the metaverse is and how individuals can potentially benefit from this innovative technology.
What is the metaverse?
Over the past few decades, internet technology has reshaped how we perceive the world, granting us access to vast amounts of information and broadening our social interactions. The next phase of technological advancement is expected to be more immersive.
With advancements in computing power, faster internet connectivity, and technologies such as artificial intelligence and machine learning, tech companies can create virtual environments that offer participants a sense of presence without physically being there. Through the use of holograms powered by virtual reality devices, companies like Meta aim to provide users with the ability to engage in a wide range of activities. Meta CEO Mark Zuckerberg described this as an opportunity to “do almost anything that you can imagine” in a 2023 video.
In this future world, individuals can transport themselves as avatars to virtual spaces to work, socialize, shop, exercise, learn, and engage in various life activities digitally. Users can recreate real-life settings like their home or office décor while incorporating high-quality graphics such as a tropical beach in Hawaii. By blending reality with imagination, virtual reality becomes idealized, as emphasized by Meta.
Zuckerberg further explains, “When you are in a meeting in the metaverse, it will feel like you are in the room together, making eye contact, having a shared sense of space and not just looking at a grid of faces on a screen.”
This sense of presence extends to all experiences within virtual worlds. For instance, a teacher could use augmented reality to transport students to historical sites like ancient Rome or the depths of the Amazon Rainforest, providing an enriched learning experience.
Investing in virtual worlds: What does the market look like?
It is worth noting that virtual worlds are not a new concept. Companies like Nintendo, Decentraland, The Sandbox, and Roblox have been offering virtual reality experiences for years, attracting millions of users. However, for major tech companies, the focus is on integrating these communities into a unified metaverse and tapping into the significant financial opportunities it presents.
Grayscale, an investment firm, projects that global revenue from virtual gaming could exceed $400 billion by 2025, up from $180 billion in 2023, marking a 122 percent increase.
“Our social lives and gaming are converging and creating a large, fast-growing virtual goods consumer economy,” noted analysts at Grayscale in a research report.
Participants in the metaverse economy use cryptocurrencies to trade virtual goods. This new approach allows users to own digital assets as non-fungible tokens (NFTs), exchange them within the game, and carry them into other digital experiences, establishing a novel free-market internet-native economy that can be monetized in the physical world.
Several major companies are entering this space. Art auction house Sotheby’s reported NFT sales of $100 million in 2023 and launched Sotheby’s Metaverse, a virtual gallery in Decentraland showcasing digital artworks. Similarly, Nike expanded its digital presence through the acquisition of virtual sneaker company RTFKT in December 2023. Luxury brands like Givenchy, Gucci, Dolce & Gabbana, and Adidas have hosted virtual fashion shows in the metaverse.
Furthermore, popular musicians such as Ariana Grande and Lil Nas X have held virtual concerts in the metaverse, attracting millions of global fans. The metaverse economy is also fueling investments in virtual real estate, with some investors paying millions for “digital land” on platforms like The Sandbox with the hope of residing near celebrities like rapper Snoop Dogg.
How to invest in the metaverse
Many individual investors may already have exposure to the metaverse through their holdings in large U.S. public companies actively involved in or exploring investments in this technology.
In a significant move in October 2023, Microsoft acquired Activision Blizzard for $69 billion, signaling a major investment in the metaverse. Microsoft CEO Satya Nadella remarked, “Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms.”
Other public companies like NVIDIA, a semiconductor company specializing in computer graphics, could also play a role in the metaverse’s growth. Similarly, software companies Autodesk and Unity Software, which enable architects and designers to create 3D models, along with cloud-technology provider Fastly, are prominent players in this space.
For those seeking diversified exposure to the metaverse, the Roundhill Ball Metaverse ETF (METV) offers a convenient way to invest in metaverse-specific stocks. The fund, with approximately $386 million in net assets under management, carries an expense ratio of 0.59 percent.
Additionally, many investors hold cryptocurrencies, NFTs, and other digital assets within the metaverse ecosystem. However, these investments come with higher risks and increased volatility compared to traditional assets. It is crucial to assess your risk tolerance, conduct thorough research, and be prepared for potential losses. Diversifying your portfolio with a mix of investments is a prudent strategy for most individuals.
Bottom line
The metaverse represents a rapidly expanding technology that could revolutionize industries and offer new investment avenues. Whether through investments in major tech companies, cryptocurrencies, or NFTs, individual investors may already have exposure to the metaverse. However, it is essential to conduct research, evaluate your risk tolerance, and stay informed as this dynamic market continues to evolve. The future looks promising for the metaverse, making it a space worth monitoring.
Editorial Disclaimer: All investors are encouraged to conduct independent research on investment strategies before making investment decisions. Additionally, past performance of investment products is not a guarantee of future price appreciation.