Is it a good investment to buy property in the metaverse?

When it comes to the directions the metaverse can take, the possibilities are infinite. As it stands, it can be explored in a way not unlike from how one would go about exploring the universe. You can shop, play games, buy a house, and see world-famous artists live in concert.

While Meta (formerly Facebook) didn’t invent the metaverse and isn’t the only stakeholder in the space, the corporation did help draw attention to this form of digital reality. Everyone is starting to take the metaverse more seriously and many are trying to get in on the action. Property is the current craze.

How does it work?

Digital real estate and real estate in the physical world work similarly. Different digital worlds in the metaverse, like The Sandbox, GALA, and Decentraland, have a certain number of real estate properties, whose prices fluctuate with varying levels of supply and demand.

One digital real estate property in Decentraland sold for the equivalent of $2.5 million in MANA, Decentraland’s native token. Why so much? That plot of digital land was located in the elite “fashion district” in Decentraland. Someone bought it in the hope that real-world luxury brands would want to place advertising or rent property in that district.

Can you make money?

Can you make money?

The first obvious question is whether digital real estate can make you money. Then, an investor would ask himself whether the metaverse has room for growth. Innovation and technology are not the limitations here. Both will continue to improve, like most initiatives coming out of Silicon Valley. The real question is whether the metaverse will keep gaining popularity.

The two sides of the coin

International corporations are also asking themselves this question. Digital currency investment platform Grayscale predicts metaverse goods and services will soon be worth $1 trillion. If this pans out, laying a stake in that digital ground might be worth it.

On the other hand, Meta posted extremely disappointing earnings recently. The company lost $250 billion and Zuckerberg, one of the biggest metaverse proponents, personally lost $30 billion. The company’s shares plummeted.

Digital real estate has no intrinsic value. It does not have a tangible asset at its core. Metaverse property deals are made in cryptocurrency, which renders this a highly volatile market because of crypto’s volatility. Bitcoin reached an all-time high of just under $70,000 per 1 BTC at the end of November 2021. It’s currently trading for around $37,000, almost 50% down from the ATH level.

Differences between property in the metaverse and the real world

Differences between property in the metaverse and the real world

The only reason people invest in digital real estate is to sell it to someone for a profit later on. While this can be true for property in the real world too, there’s more than one reason to acquire the latter. You might want to live there, it’s near a good school, you like the neighborhood, etc. The digital world’s popularity is the only aspect adding or detracting value from the property.

Arms race

Many developers are throwing themselves at the metaverse. It’s definitely becoming akin to an arms race and it’s hard to say what it’s going to culminate in. There was a similar trend with the video game industry in the past, resulting in a huge number of games to choose from. This will go one of two ways. There might be lots of digital worlds within the metaverse to choose from or there might be just one left at one point in time. The rest will be relegated to obscurity.

In the second scenario, your ROI depends on your financial prudence and shrewdness. It will be of paramount importance to purchase digital real estate property in the world that is left.

The human perspective

Another aspect is whether this is how we want life to look. People are moving their experiences from the real world to the digital one en masse. The processes in the metaverse are starting to mirror those in the real world. This has its pros and cons. The problems in the real world are simply moving to a digital one.

It might be unreasonable to spend millions creating a new world instead of investing that money to help those in need in this one.

The bottom line

You might make a ton of money from property in the metaverse, but the chances of that hinge on factors beyond your control. Depending on your objectives, a safer and more traditional investment might have a higher likelihood of working out for you. Make decisions that are most likely to work out in your favor.

Your final decision should correspond to your willingness to take risk. As with any investment, don’t put more money in than you can afford to lose.

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