The metaverse has been one of the hottest topics in the investing world over the last few months, and many investors are eager to get a piece of the pie.
Within the metaverse, users will be able to interact with each other through virtual reality. It will also be possible to buy virtual land and other goods, as well as enjoy fully immersive experiences digitally.
Cryptocurrency also plays a major role within the metaverse. Whether you're already investing in crypto or are considering getting involved now, here's what you need to know about the impact the metaverse could have on your investments.
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What does the metaverse have to do with crypto?
One of the most notable ways crypto and the metaverse intersect is through non-fungible tokens (NFTs).
NFTs are a form of digital ownership, and they allow users to buy and sell virtual goods, services, and experiences within the metaverse. If you wanted to buy a plot of land within the metaverse, for example, you would use cryptocurrency to buy the NFT for that land. That NFT, then, would serve as digital proof that you are the sole owner.
Ethereum (ETH 0.91%) is the largest host for NFT marketplaces, so it could play a major role in the metaverse. If an NFT is based on the Ethereum blockchain, that means you'd pay for it using an Ethereum-based token, such as Ether. The more people are using these tokens, the more Ethereum will grow.
There are also other cryptocurrencies, such as Decentraland (MANA -0.86%) and The Sandbox (SAND -0.66%), that are built solely for the metaverse. Not only can users buy virtual goods or services with these cryptocurrencies, but in some cases, they can also use their tokens to vote on policies or other regulations within the metaverse.
What does this mean for you?
The metaverse could have an enormous impact on cryptocurrency, but that alone doesn't necessarily mean you should rush out to invest. Both the metaverse and crypto are still speculative at this point, and nobody knows for certain whether they will succeed over the long term.
Whether you've already invested in crypto or are simply considering it, be sure you're looking at the big picture. Does that cryptocurrency have any uses outside of the metaverse? If so, how likely is it that it will continue to grow over time? How does it stack up to its competitors?
The more you know about the cryptocurrencies you're interested in, the easier it will be to choose the right ones for your portfolio. By sticking to cryptos that have solid long-term potential (with or without the metaverse), it's more likely your investments will succeed.
Both crypto and the metaverse could see tremendous growth in the future, but they're still risky investments right now. Doing your research could help limit your risk, though, giving your investments a better chance at thriving over time.
