What Gives Metaverse Property its Value?

Authored by Matt Heater
Matt Heater

Matt Heater

Published June 14, 20223 mins
metaverse-value-1200x1200

From social media to gaming to remote work, we’ve been living in a highly digital world for years now. Fueled by crypto, the next iteration of this virtual world is often referred to as the metaverse. In the metaverse’s 24/7 online world, you can purchase digital goods, services, and even land. But how do you know what anything is worth, especially property, in the metaverse?

Location, location, location…to activities.

As millions of dollars are being spent on vacation homes in the real-world, we are also seeing millions of dollars (in cryptocurrencies) being spent on digital real estate as people hangout in the metaverse. Yes, people are spending millions on digital property that serves as a getaway from IRL. Sounds neat but can virtual property actually be worth anything? 

When there is no limit to the amount of property that can be created, then virtual property must be evaluated differently. The old axiom for IRL real estate investing is location, location, location. That rule of thumb somewhat holds true in the metaverse. But virtual property is not merely a set of longitude and latitude coordinates. When travel can be done through teleportation, like it can in the metaverse (beam me up, Scotty), one must think slightly differently when valuing property in these new virtual worlds (recall the Metaverse is not a single place). 

The success of a virtual world, and the property within, largely depends on a network effect that drives more participants into that virtual world. Similar to the real-world, the value of a property in the metaverse may be driven by what and who the property is located near, but even more specific, the value may largely be determined by the activities the property is near (think digital concerts, shopping malls, etc).

Something for everyone.

What activities might draw folks to one metaverse over another? Many things… 

Music enthusiasts might choose a metaverse world with live music. Last year, Decentraland hosted a concert that headlined the famous DJ Deadmau5, offering VIP areas and concert merchandise. Similar to in real-life, these VIP areas and merchandise are priced at levels that people are willing to pay.

Maybe you want to be neighbors with Snoop Dogg (and think that’s worth $450,000) and thus the Sandbox would be your cup of tea (or gin and juice). Or are you into virtual reality disco? Somnium Space might be the place for you with their Saturday Disco Night

There’s something for everyone and we think that things are just getting started. Blockchain technology provides a unique set of tools for building community owned and operated digital worlds. But if you dive into the metaverse, invest wisely in your virtual property. Crypto investors must recognize that the metaverse is very different from the real world and conduct their analysis accordingly. And if you want a more passive, diversified investment without having to “enter” the metaverse, take a look at our Metaverse Basket. The Metaverse Basket allows you to invest in the cryptocurrencies that support some of the latest metaverse projects without owning any actual digital land or goods. Most of all, don’t invest more than you can afford to lose. 


DISCLOSURE:
Argonaut Asset Management Inc. (d/b/a “Makara”) is a wholly-owned subsidiary of Betterment Holdings, Inc., and an affiliate of Betterment LLC. The above material and content should not be considered to be a recommendation. Makara is an investment adviser registered with the US Securities and Exchange Commission. Registration as an investment adviser does not imply a particular level of skill or training. Makara exclusively provides investment advisory services related to investing in cryptocurrencies and other digital assets.
Makara is not a broker-dealer, exchange, custodian, or wallet provider, and is not intended for frequent trading activity. Investing in digital assets is highly speculative and volatile and Makara is only suitable for investors who are willing to bear the risk of loss and experience sharp drawdowns.
Cryptocurrency is not legal tender and is not backed by the government. Cryptocurrency, (including but not limited to bitcoin and ethereum, and stablecoins such as USDC), is not subject to Federal Deposit Insurance Corporation (“FDIC”) or Securities Investor Protection Corporation protections (“SIPC”).
Descriptions of publicly traded companies or digital assets are provided for informational purposes only as illustrations of themes in the digital asset industry. Nothing contained in this document should be construed as a recommendation or offer to purchase or sell any asset described. Past performance is not a guarantee of future results. For more complete disclosures and information about how Makara works, please visit our Terms of Service and Help Center.
Any links provided to other websites are offered as a matter of convenience and are not intended to imply that Betterment or its authors endorse, sponsor, promote, and/or are affiliated with the owners of or participants in those sites, unless stated otherwise.

Authored By
Matt Heater

Matt Heater

Matt previously led business development at a boutique digital asset consulting firm and he held a variety of roles at IBM, including as a consultative sales lead within Watson Financial Services. He led operations for the Blackstone Group’s Hedge Fund unit’s London office, and evaluated mutual funds and hedge funds as an auditor at KPMG. Matt earned his MBA from the University of Washington, his Bachelor’s degree in Business-Accounting from UNLV, Lee Business School, and holds the Chartered Alternative Investment Analyst designation (CAIA) and a Series 65 license. Matt is a fan of Michael Mann films, and has a cat named Edie.