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Investment Opportunities in the Metaverse

by YDH
Investment opportunities in the Metaverse

The Metaverse constitutes a highly interactive three-dimensional virtual world. In Metaverse, the users can trade land, buildings and other digital assets and can also explore the space using their personalized avatars, just like the real world. The avatars are basically the duplicates of the users and are able to perform tasks like a human being does in the real world.

The Metaverse concept came more into limelight during the COVID-19 pandemic when it became difficult for everyone to have face to face interactions, hence were left with the option of connecting digitally and implementing remote-work policies to keep organisations running along with providing a secure and safe environment to the employees as well. This resulted in people wanting to learn more about the Metaverse and its advantages.

How to invest in the Metaverse

There are plenty of opportunities to invest in the Metaverse considering its different platforms like Meta, virtual reality headsets, nonfungible token marketplaces. Although the opportunities are widely available but so are the risks associated as well.  There are primarily two ways to invest in the metaverse:

Direct Investment – Investors can directly invest in the Metaverse by purchasing properties and different assets inside the Metaverse. For example, investment can be done by providing the software or hardware that supports virtual or augmented reality worlds.

Indirect Investment – Investments can also be made indirectly by buying stocks of companies or Exchange Traded Funds (ETFs) that invest in the metaverse.  

As per RBC Brewin Dolphin’s Rob Burgeman, “Axa World Funds Metaverse is available on investment trading platforms and offers an exposure to a broad range of companies, ranging from gaming companies such as Activision Blizzard and Electronic Arts, to social media companies like Snap, and technology behemoths such as Alphabet [Google’s parent], Microsoft and Meta.”

Reasons to invest in the Metaverse

With the growing technology and digitalization, there is a huge future for Metaverse and investing in Metaverse is a far-sighted approach which can help investors in long run. 

As per Rob Burgeman who is an investment manager at RBC Brewin Dolphin says,” Investment can often be very faddy and fashion-focused and one of the most ‘on trend’ areas at the moment is the metaverse. Fund houses love these trends, as it enables them to issue new funds and attract fresh money, as well creating some excitement.”

Investing in Metaverse is also well explained by Franklin Templeton’s Rafaelle Lennox as, “many large tech companies have pivoted towards the metaverse for their next major area of development in the same way many did at the inception of the internet: There appears to be tremendous real-world business opportunities for investment in this space. We believe that we’re on the cusp of the next wave, with decentralisation – think smart contracts, cryptocurrencies, and virtual marketplaces. This is the next iteration of the internet, which is 3-D, decentralised and highly interactive.”

Acknowledging the same, Bestinvest’s Jason Hollands says that investing in the metaverse “sounds great”. But he also cautions that, before investors get stuck in, they should inspect exactly what investment themes they are supporting in practice: “Various technology, software and video gaming businesses – and payment services that facilitate use of online services – can all claim to be involved in the metaverse, or potential beneficiaries of it.”

Different platforms of Metaverse worth investing

As per AXA, there are four primary sectors of the metaverse which are worth investing for as they provide long-term investment opportunities. These are:

  • Gaming – Gaming is Metaverse’s first building block in which there is good opportunity of investment in the headsets as it is expected that the number of virtual and augmented reality headsets used in gaming will grow from four million in 2021 to forty-two million by 2025.
  • Socialising – With the increase in number of people being online, socialising has become an important part of the metaverse as people are looking forward to different opportunities to connect. 
  • Working – During pandemic, working remotely became only option for tech employees globally which made the companies realise about the importance of digital connect and collaboration.
  • Enablers – Enablers are responsible to provide the semiconductors, network infrastructure and the technologies that allow the metaverse to function, along with digital payment companies and cyber security businesses.

Risks involved in Investing in Metaverse

Right now, Metaverse is still evolving and the users should have an awareness about the risks involved, while investing.

Risks with Crypto- For investors worldwide, cryptocurrency is comparatively a new concept compared to the traditional stocks, bonds or other assets like real estate. Cryptocurrency has investment risks like lack of stability. Regulation and oversight factors are missing in cryptocurrency which leads to the lack of stability in the market. Adding to it, because of low liquidity, whenever any large investor enters or exit the positions, a massive price shift is caused. Sometimes, buyers buy cryptocurrencies at inflated prices because of the hype but eventually they sell them off either for profit or due to buyers’ remorse.  

Risks with NFT- NFT purchases and ownership also has its own risks. There is a lot of risk for creators and buyers of NFTs tied to the digital assets as anyone can create an NFT out of anything on the internet. For example, it might happen that a creator could have spent his time collecting a prized digital asset with the thought to sell for a profit and the market falls.

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