Investing in the metaverse: A beginner’s guide

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The future of the internet includes virtual worlds where humans can interact without the confines of physical space. Welcome to the age of the metaverse. According to analysts’ estimates, these virtual environments could be the next big investment opportunity.

Although the metaverse is still evolving, the technology can revolutionize everything from e-commerce to social media and even real estate. As audiences for these virtual environments grow, so does the interest from corporations trying to capitalize on this trend. Facebook, for example, rebranded its name as “Meta”  and spent more than $40 billion since 2020 trying to build the metaverse.

In this guide, we aim to help you better understand what the metaverse is and how you might profit from the technology.

Over the past few decades, internet technology has revolutionized how we experience the world, giving us unfettered access to information and expanding our social interactions. The next evolution in tech, however, will likely be more immersive.

Tech companies can develop virtual environments thanks to greater computing power, faster internet connectivity, and other technological advancements like artificial intelligence and machine learning. These spaces aim to give participants a sense of being present without leaving where they are. By using holograms powered by virtual reality sets, or other devices, companies like Meta promise to give people the opportunity “to do almost anything that you can imagine,” as Meta CEO Mark Zuckerberg explained in a 2022 video.

People can teleport themselves as avatars to virtual environments to work, play, shop, exercise, learn, and experience most life activities digitally in this future world. Users can also replicate real-life elements like their home or office décor while incorporating renderings of advanced graphics such as a beach in Hawaii. By blending the imaginary with the real, virtual reality becomes idealized, as described by Meta.

“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,” Zuckerberg explains.

The same feeling translates across all experiences in virtual worlds. A schoolteacher, for example, could transport students to ancient Rome or the depths of the Amazon Forest through augmented reality, an enhanced version of the physical world.

Investing in virtual worlds: What does the market look like?

It’s important to note that virtual worlds aren’t new. Companies like Nintendo, Decentraland, The Sandbox, and Roblox (RBLX) have been operating virtual reality spaces for years. Combined, these companies attract millions of users. For big tech companies, nevertheless, the stakes are high as they aim to bring together these communities into a unified metaverse. And with this goal, they also hope to capture a slice of the billions of dollars at stake.

Investment firm Grayscale, for example, estimates that global revenue from virtual gaming alone could surpass $400 billion by 2025 from $180 billion in 2022, an increase of 122 percent.

“Our social lives and gaming are converging and creating a large, fast-growing virtual goods consumer economy,” analysts at Grayscale wrote in a research report.

Content creators and other participants use cryptocurrencies to trade virtual goods in the metaverse economy. “This new paradigm allows users to own their digital assets as non-fungible tokens (NFTs), trade them with others in the game, and carry them to other digital experiences, creating an entirely new free-market internet-native economy that can be monetized in the physical world.”

And many big companies are starting to jump in. Art gallery Sotheby’s (BID) announced in 2021 that NFT sales reached $100 million and began operating Sotheby’s Metaverse, a new virtual gallery in Decentraland that allows visitors to view available digital artworks. Similarly, Nike announced in December 2021 an expansion of its digital footprint through the acquisition of RTFKT, a virtual sneaker company. Other couture brands like Givenchy, Gucci, Dolce & Gabbana and Adidas, to name a few, have held virtual fashion shows in the metaverse.

Likewise, pop artists such as Ariana Grande and Lil Nas X, have performed virtual concerts in the metaverse, attracting millions of fans from across the globe. The metaverse economy is also opening up new investments in real estate. Some investors have paid millions of dollars for “digital land” on metaverse platforms like The Sandbox, hoping to live next to celebrities like rapper Snoop Dogg.

For many individual investors, there’s a good chance you already have some exposure to the metaverse, as many large U.S. public companies are either already participating or are actively looking to invest in the technology.

In October 2023, Microsoft (MSFT) acquired Activision Blizzard for $69 billion in one of the biggest gaming deals in history — and a big bet on the expansion of the metaverse. “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,” Microsoft CEO Satya Nadella said.

Other public companies such as NVIDIA (NVDA), a semiconductor company that powers computer graphics, could also play a role in the growth of the metaverse. Similarly, Autodesk (ADSK) and Unity Software (U), software makers that allow architects and designers to create 3D models, and cloud-technology provider Fastly (FSLY) are also top names in the space.

For those looking for broader exposure, Roundhill Ball Metaverse ETF (METV) offers an efficient and easy way to invest in metaverse-specific stocks. The fund has about $386 million in net assets under management and carries an expense ratio of 0.59 percent.

And of course, many investors have exposure to cryptocurrencies, NFTs and other digital assets that are part of the meta ecosystem. Nevertheless, many of these investments carry greater risks and additional volatility than traditional holdings. So, it’s always important to consider your risk tolerance, do your research and be at peace with what you might be willing to lose. For most people, having a diversified portfolio with a range of the best investments is a smart way to go.

Bottom line

The metaverse is a rapidly growing technology with the potential to revolutionize industries and provide new investment opportunities. As an individual investor, you may already have exposure to the metaverse through your investments in big tech companies or through cryptocurrency and NFTs. However, it’s important to do your research and consider your risk tolerance before diving into this emerging market. The future is bright for the metaverse, and it’s worth keeping an eye on as it continues to evolve.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.