Key takeaways:
- Metaverse real estate sales exceeded $500 million in 2021.
- Despite the recent boom in interest, digital real estate investing remains highly speculative.
- Diversified crypto funds could serve as a smart introduction to investing in digital properties.
How much would you pay to be Snoop Dogg’s virtual neighbor in the metaverse?
If the number is anything less than $450,000, you’re unfortunately out of luck, because that was the price paid in December for a plot of land next to a replica of the west coast rapper’s California home in the “Snoopverse,” a digital community hosted on The Sandbox platform.
Like it or not, virtual land sales in the metaverse are heating up, and it isn’t just wealthy gamers who are driving up prices. Last year, a number of large, global corporations decided to stake their claim to virtual properties, including the likes of PwC, HSBC, and JPMorgan. In February, CNBC reported that metaverse real estate sales had exceeded $500 million in 2021, and are only expected to double by the end of this year.
Of course, investments in the metaverse remain highly speculative, and if we want to know whether or not the purchase of a digital condo might actually be a good investment, we’ll need to consider much more than a bit of media buzz and the early growth projections of experts.
How to Buy Real Estate in the Metaverse
If we are interested in acquiring some virtual land, we should first understand how making such a purchase is even possible.
One thing is for sure, you won’t be scrolling on Redfin and making a down payment with an ordinary credit card. At this point, the bulk of sales are taking place directly on virtual reality gaming platforms The Sandbox and Decentraland, and most purchases will currently need to be made in Ethereum, an increasingly popular medium of exchange online and the second largest cryptocurrency by market cap.
In any case, the learning curve will be steep if you don’t already have experience owning and trading cryptocurrencies. You’ll need to know how to buy Ethereum, how to store it securely on a self-custodial wallet, and in most cases you’ll need to be prepared to pay extra in “gas fees,” or additional per-transaction charges based on payment traffic on the Ethereum blockchain.
Moreover, because land sales in the metaverse are so new, they come with many of the same risks that continue to plague the broader Non-Fungible Token marketplace. Due to the novelty of digital assets, investors have few protections and must be constantly vigilant to avoid being scammed by bad actors. Common scams include promoting assets based on artificial scarcity, making false promises about underlying utility, and “rug-pulling,” or when the primary controllers of an asset unexpectedly liquidate their holdings, leaving any remaining investors empty-handed.
The Waiting Game
Just because real estate investments in the metaverse are hyper-speculative and come with significant risks, that doesn’t mean that a smart bet on the future of metaverse gameplay and social interaction can’t eventually pay off. In fact, investors seeking early exposure can start by simply familiarizing themselves with the broader cryptocurrency market, and can even bypass learning curves and balance risk by investing in a professionally managed crypto fund.
Sure, trading crypto can be risky, but growing institutional interest coupled with a recent drop in Bitcoin volatility seems to suggest that the market is maturing, and that crypto is becoming an increasingly viable option in the alternative investment space.
The truth is many people don’t have the time or expertise to manage their own stock portfolio, let alone a collection of assets that have only existed for a little more than a decade. By investing in a diversified fund, with professionals who have been studying the crypto marketplace for years, you’re both investing in the underlying growth potential of digital assets without making an isolated bet on a single coin or plot of land. Fortunately, options in the crypto fund space are expanding all the time, and Yieldstreet will even be launching our own offering this week that utilizes an index-like strategy to help earn returns for investors on the industry’s leading coins by market cap.
So is now the time to buy property in the metaverse? Honestly, it’s hard to tell. What we do know, however, is that a lot of interactions are expected to take place in the metaverse in the coming years, and it will ultimately take some time to know exactly where the highest concentration of value will be realized.
Learn more about the ways Yieldstreet can help diversify and grow your portfolio.
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Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.
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