Few cryptocurrencies have been bigger winners in recent months than The Sandbox (SAND 5.65%). Over the past 12 months, The Sandbox's valuation has skyrocketed more than 11,600%. 

But is The Sandbox a smart pick for investors now? Here are two takes -- one bullish and one bearish -- about the prospects for the cryptocurrency.

A person holding a touchscreen tablet with images of a virtual earth and other computer-generated images.

Image source: Getty Images.

Bullish case: combining two hot areas

Keith Speights: There's no question that two of the hottest investing areas around right now are cryptocurrencies and the metaverse. The Sandbox combines the two. No one should be surprised that it has soared into the top 40 biggest cryptocurrencies ranked by market cap.  

Players in The Sandbox can buy virtual land that are nonfungible tokens (NFTs). They can build and develop on this land and monetize it any way they choose. The Sandbox metaverse continues a successful legacy of the Sandbox mobile game, which Apple (AAPL 0.45%) recognized as the 2012 Best Game of the Year.

The Sandbox could be a huge winner in the years to come as the adoption of the metaverse expands. Of course, there will be plenty of competition. However, The Sandbox already has lined up an impressive array of partners, including Adidas, Atari, and Snoop Dogg, that could set it apart from its rivals. It could have several key catalysts on the way in 2022, with a progressive opening of its metaverse and a mobile version launch.

Bearish case: relying on the gaming community

Adria Cimino: The Sandbox truly depends on the gaming community. That is both its strength and its weakness. But right here, I'll focus on the weakness. Sandbox isn't a cryptocurrency like Bitcoin or Ethereum. Bitcoin is popular as a storage of value -- or a payment method in the real world. And Ethereum has proved its ability to power platforms for decentralized finance -- for example, you can buy insurance or loan out tokens to earn interest through Ethereum.

The Sandbox token, however, is used to power the Sandbox world. This means growth in the token will depend on success of the Sandbox game -- its ability to bring in users and maintain popularity over time. Gaming is a big industry. But it's also a competitive industry. Generally, investing in cryptocurrency is high risk. That's because it's new -- and it's not yet clear whether the decentralized approach to finance and other parts of life truly will take off. But investing in Sand is particularly risky because its use is restricted to the game. So we have a dual problem: First, the token only is used by those involved in the game. That's a limited audience. And second, the token's ability to appreciate is limited because it can't be used in the real world.

Finally, I'm concerned about the potential for further gains in Sand for another reason. That's the increase it's posted so far. Sand has soared a whopping 17,200% since the start of the year. That may price in a lot of Sandbox's future success. And with thousands of cryptos to choose from, those that have posted huge gains will have to convince investors that new catalysts are on the horizon to push them higher. Otherwise, investors may turn to newer players with greater potential to rise quickly. That's the risk The Sandbox faces right now.

Who should consider playing in The Sandbox?

The Sandbox could remain a huge winner in the coming years as it has been over the last 12 months. However, the risks are real. Risk-averse investors will be better off avoiding The Sandbox (and other cryptocurrencies, too).

However, highly aggressive investors who like high-risk, potentially high-reward alternatives could like The Sandbox. That's especially the case if they also enjoy gaming. But, as is the case with other highly risky investments, don't put up more money than you're willing to lose.