During the NFT craze that started during the height of the Covid pandemic, Facebook rebranded their company to Meta. At the same time, the idea of virtual reality and virtual workspaces were starting to become more popular as people were increasingly working from home. The concept of “the metaverse” then became a hot topic, with companies vying for a piece of what could be a lucrative concept.
However, artificial intelligence has been a far more lucrative technology, and in February, Mark Zuckerberg announced that Meta was shifting their focus to generative AI, which many took as a sign that the metaverse concept was being left behind. Let’s talk about what has happened with the metaverse and whether it will have any effect on crypto.
Metaverse Was a Bad Bet
The reality is that the virtual reality concept of the metaverse was too ambitious at this point considering the current technologies it can implement. It was also far more hype than anything else, there isn’t a single finished metaverse product that people can still enjoy.
A variety of companies began to shift their focus to the metaverse and creating virtual worlds, NFT marketplaces, and more. As we’ll see below, many of these companies made a poor bet that the metaverse would live up to the hype, when really, not many people in the general population cared or participated, especially compared to mainstream options.
Let’s first talk about Decentraland (MANA), a virtual world where users purchase plots of land that they can later navigate, build upon, and monetize. While the price of MANA is far down from its all-time high, the asset still has a billion dollar valuation. That would seem like a good valuation until you look at actual use of the platform, which, in the last 90 days, has seen just over 4500 unique users. Over 7 days, it’s just 4,000, perhaps indicating there’s about 4,000 people who play the game on a regular basis.
Comparatively, Fortnite has more than 300,000 daily users. The 4500 number is also far down from the 8,000 they had in Fall 2022, signalling a continued downtrend. Neither number is high enough to expect some sort of renewed interest in the asset.
The Sandbox (SAND), one of Decentraland’s main competitors, is fairing a bit better. The Sandbox is a blockchain-based virtual world allowing users to create, build, buy and sell digital assets in the form of a game. They have far more intellectual properties involved in their game including Adidas, Gucci, and Ubisoft. Like Decentraland, SAND has over a billion dollar valuation, but their metrics are also not overly promising either.
Another sign of the metaverse mostly being hype, The Sandbox actually has a million followers on Twitter, but their posts rarely even get 100 likes, indicating a lack of interaction for those that do follow them.
Finally, let’s take a quick look at Meta themselves, as they probably placed the biggest bet considering they changed their name. Reality Labs, the team within Meta tasked with developing the virtual and augmented reality technology for the metaverse, lost nearly $4 billion in the first quarter of 2023. The company’s first flagship metaverse offering, Horizon Worlds, lost 100,000 users from February 2022 to October 2022, dropping down to 200,000 (and now likely lower) active users. Even if those were good numbers (they’re not), the company’s goal was 500,000 users and they never even got there.
Crypto’s Role in the Metaverse
Thankfully, even if the metaverse is finished (and this writer mostly hopes it is), it doesn’t really mean a lot for digital assets. Apart from crypto assets like SAND and MANA that are focused on the metaverse and virtual reality, and NFT projects looking for similarly lucrative opportunities, most of the projects in the cryptocurrency sector are focused on other use cases.
Thanks to this reality, the failure of the metaverse is unlikely to have any effect on the general digital asset market, certainly not Bitcoin. Assets like Ethereum may take some sort of hit, but it seems more likely that funds will flow out of altcoins within the Ethereum ecosystem that are related to the metaverse and back into ETH itself, which would boost its price.
Closing Thoughts: Will the Tech Ever Get There?
The metaverse, in concept form, is somewhat interesting, but the reality is that the tech and desire to use the tech really isn’t there, at least currently. It would likely take another pandemic-like event to make virtual reality a lucrative opportunity again, as that’s what pushed it into discussion the first time.
The financial backlash for many of the companies that did try to stake their claim in the metaverse is likely enough to make most of them wary of trying a second time, especially if numbers continue to fall.