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Metaverse: The next chapter for investing or a temporary hype?

18 January 2022

2021 saw plenty of innovations come to the mainstream, but the metaverse indisputably hit the home run. Originally coined by Neal Stephenson in his 1992 sci-fi novel Snow Crash, the term describes a type of post-internet universe consisting of a physical, virtual, and augmented reality in a shared online space. It’s been almost 30 years since the novel was first published, and what was once considered speculative fiction could become our future reality. We are only at the beginning of the metaverse phase now, but the concept has the potential to develop into something that we’re not even able to understand yet.

Many people seem excited and ready for this new post-internet era, but just like with NFTs, does anyone truly understand what it is? This begs the question, is the metaverse the next chapter for investing or a temporary hype?

What is the metaverse?

Perhaps one of the easiest ways to understand what the metaverse is is to think of it as cyberspace. It’s not a place or a particular platform, nor is it an app or a video game. It’s a collection of technologies that collectively make up virtual space, called the metaverse.

It isn’t quite like virtual reality games where the VR world comes to life only when you are logged in as a player. The virtual worlds in the metaverse continue to exist even when you’re not playing.

Essentially the metaverse is a virtual world that exists parallel to the real world. It’s like an alternate reality that you can hop in and out of whenever you want. Anyone who possesses the tools can access the metaverse and share the same experiences. Think of it like two strangers from different countries visiting the same museum.

The new internet or the Web 3.0

The metaverse is often referred to as the successor of the internet as we know it. “Right now, we are on the cusp of the next internet,” wroteMathew Ball, managing partner of venture capital company called Epyllion Industries. As remote and hybrid working find their place in our society, the metaverse, which can offer an illusion of office space in your living room, certainly sounds appealing. So does joining a virtual birthday surprise party from thousands of miles away or going on a retreat in a virtual space that you wouldn’t be able to afford in real life.

Motivated by the need to satisfy the population demand for events and social activities during lockdowns, companies scrambled to introduce VR and AR experiences. So, while the concept of virtual realities is not new, the pandemic has certainly accelerated its introduction into our mainstream.

Once upon a time concepts such as digital currencies, blockchains, and NFTs were just that – concepts. Today they are on the way to becoming an inevitability – reshaping the way we interact and live.

What companies participate in the metaverse?

The importance of being a pioneer in this emerging concept is self-evident. Just think about the internet in the 70s – no one could quite explain it but a couple of decades later it was making its way into every household across the globe. Nobody owns the internet, and yet the pioneers of internet users are some of the most valuable companies today – Facebook, Apple, Amazon, Netflix, and Google (the so-called FAANG stock).

If the metaverse is indeed the next internet, its scope could be even larger than that of the internet. So could the potential for profits. As a result, many companies are already full-fledged metaverse advocates.

Besides those listed above, Nvidia, Disney, and Apple have also made a foray into the field. The metaverse has, seemingly overnight, become the macro-goal and the most important marketing tool for some of the world’s tech giants.

One small step for Mark Zuckerberg, one giant leap for humanity

Back in 2019 when most people were still trying to come to terms with Bitcoin breaking new records, Mark Zuckerberg was busy launching a social VR (virtually reality) called Facebook Horizon. Just two years later, the company rebranded as Meta Platforms claiming to have a new focus – developing a metaverse ecosystem. The social network Facebook still operates under the same name, but it is now a company under Meta’s umbrella.

In the summer, Zuckerberg launched a public version of Horizon Rooms which allow you to participate in meetings using a VR headset and avatars. “In the future, instead of just doing this over a phone call, you’ll be able to sit as a hologram on my couch, or I’ll be able to sit as a hologram on your couch, and it’ll actually feel like we’re in the same place, even if we’re in different states or hundreds of miles apart. So, I think that that is really powerful,” explained Meta CEO.

The scope of this new venture

Like a Black Mirror episode that leaves you stunned, the potential reach that the metaverse has is absolutely astounding. We know from blended reality games that people can form real-life emotional attachments to things that only exist in the virtual space. These things can be experiences or pets, or even materialistic items like cars and clothes. Those items are bought in the virtual world, but with real-world money. This gives rise to a potential new economic environment. In other words, somewhere down the line, real-world people could be looking to quit their real-life jobs and start monetizing their ideas in the metaverse.

Although the full scope of the metaverse is hard to imagine, the cogs that will make up this machine are starting to feel very real. With endless possibilities and unpredictable developments, if the concept is brought forward as planned, its final version has true potential to be lucrative.

How does the metaverse affect trading and finance?

Early in 2020, venture capitalist Mathew Ball shared his thoughts on the metaverse and what he thinks it means for the world of finance. He believes that the metaverse will be a full-fledged economy where people and businesses will buy and sell things as they do in real life. Because the metaverse is a digital world, it is only natural to assume that the currency used will also be digital. Every virtual world needs virtual money. This is a void that cryptocurrencies will likely fill, just as the MANA token allows you to buy anything on Decentraland.

Another crucial aspect of the metaverse is the non-fungible-tokens (NFTs) that allow people to make real-world money from the items that they create within digital worlds. However, NFTs are not limited to gaming – they can be art, sports cards, houses, and much more.

The participants in the metaverse will also be able to build, purchase, invest and own assets in the metaverse economy. All of this may sound a little far-fetched, but infant versions of these virtual world assets already exist. The worlds first-ever digital NFT house recently sold for over $500,000. And this is just the beginning. Earlier this year, a committee of advisors from different industries created a Metaverse centricexchange-traded-fund (ETF) trading on NYSE, opening the door for retail investors.

A new financial ecosystem for fintech to tap into

We anticipate that this paradigm-shifting concept will evolve into a digital platform that people will use both for business and personal interactions. In fact, to achieve a completely immersive environment, data management and finance will also have to take place on the metaverse. Much like there is a process in the real world that enables you to purchase real estate, for example, a similar process will have to exist in the virtual world. This implies that the metaverse will have a huge economic ecosystem and fintech as we know it has barely even scratched the surface.

Banks and brokerages in Asia have already begun constructing virtual environments for their clients. This is just the beginning of the race for companies trying to establish themselves as the forerunners of the metaverse future.

How can I invest in the metaverse?

As we already discussed, the concept of the metaverse is still in its pilot stages. For now, the ways in which retail investors can get involved are relatively limited. If the concept develops to be as large as people are expecting, any company that is directly or indirectly involved is likely to experience growth. Retail traders have the potential to trade any anticipated stocks swings resulting from the company’s developments.

Trading CFDs on cryptocurrencies that are likely to participate in the metaverse

Using a trading platform, retail investors can trade CFDs on cryptocurrencies that are metaverse-centric. CFDs are probably one of the simplest ways to get access to an asset without large capital. Having said that, it’s important to note that CFDs can also be very risky so caution is advised.

Investing in metaverse-centric ETFs

Instead of putting all your eggs in one proverbial basket (a metaphor for investing in one company’s stocks) retail investors can set their focuses on ETFs which are a culmination of companies that are metaverse-centric

The bottom line

One of the most important aspects of the metaverse is its potential ability to defy outdated social constructs, geography, financial inequality, and social biases. But this will depend on who gets to command this alternate universe. Many propagate for the metaverse to be decentralized for a decentralized future. However, whether it will be run by one operator or rely on community-based standards as an open-source platform, remains to be seen.

This question is also important when considering if the metaverse is the next chapter for investing. If it will be open-source, virtually anyone could be making a profit from it.

However, if the power will lie in the hands of one ultimate ruler of the metaverse, he is likely to be the one that gets the biggest chunk of the profits. Some are already speculating that Meta and Apple will find themselves competing for the position eventually. The timeframe and development of the metaverse largely depend on how the new year unfolds and what the pandemic has in store for us.


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