It's safe to say that the metaverse experiment from Meta Platforms (META -0.54%) has thus far been a spectacular failure. Despite billions of dollars being poured into crypto, blockchain, and metaverse projects, Meta hasn't been able to turn a profit. Most recently, Meta reported a $2.81 billion quarterly loss on its metaverse business. Year to date, Meta has lost nearly $6 billion. The company gambled big (even going so far as to change its name from Facebook last year) and has now lost big in 2022.
But that doesn't mean that the metaverse as an investment opportunity is over. Blue-chip consulting firms such as McKinsey & Co. continue to pump out glowing reports over the projected future market size of the metaverse, and there's still plenty of money sloshing around the crypto markets looking for metaverse opportunities in places like Dubai. So, if you have a huge appetite for risk, here is how to think about investing in metaverse cryptos across a variety of investment horizons.
If your investment horizon is relatively short-term -- 12 months or less -- then you really need to be focusing on the world of blockchain gaming. Most of the top metaverse cryptos right now are really just gaming coins, meaning they are the currency that people use within the games. They have little to no value outside of the games, but as long as people are playing the games, then their price will continue to go up. Just keep in mind that the relative popularity of a game can ebb and flow.
Last year, for example, the big game that everyone was talking about was Axie Infinity (AXS), and Axie Infinity still ranks in the Top 40 among all cryptos in terms of market capitalization. But this year, the big game that has everyone talking is STEPN (GMT 2.77%).
What makes STEPN so unique is that it is an entirely new category of game called "move-to-earn," which essentially means that you get paid crypto to exercise. As soon as you purchase an in-game NFT sneaker, you can then start earning crypto every time you go out for a walk, jog, or run. Already, STEPN has a vibrant user community of 3 million people and ranks in the top 75 cryptos. Twelve months from now, however, we might be talking about an entirely new gaming crypto.
If you are taking a slightly longer investment outlook, say 12 months to three years, then you will want to focus on the metaverse worlds that are springing to life. Right now, the two most popular metaverse worlds are The Sandbox (SAND 1.52%) and Decentraland (MANA 0.89%), both of which rank in the top 40 cryptos by market capitalization.
When you hear about brands becoming active in the metaverse, it is usually in reference to these two metaverse worlds. Brands are literally creating slices of digital real estate in the online world and getting users to stop by their digital properties. The companies that have invested in these worlds include some of the biggest consumer brands in the world.
However, there are plenty of other metaverse worlds still being built, and that's where Meta got into trouble. The company essentially tried to tell everybody that they owned the metaverse and that all metaverse worlds were eventually going to be part of Meta one day. If you're Mark Zuckerberg, this makes sense. Wouldn't you want to have a firm grasp on the greatest new market opportunity the world has ever seen? But that really goes against the spirit and ethos of the metaverse, which is supposed to be decentralized.
Over a long-term time horizon, the real money will be made in the cryptos that are the "building blocks" of the metaverse. These include Ethereum (ETH 2.50%), Solana (SOL 4.36%), and Avalanche (AVAX 12.35%), all of which have very active metaverse projects being built on top of their blockchains.
These are probably the best long-term investments because it really doesn't matter which specific game or metaverse world comes out on top. For example, both Decentraland and The Sandbox are built on top of Ethereum, so it stands to reason that this crypto is going to do well no matter which one emerges as the clear winner.
So there you have it -- a quick guide to investing in metaverse cryptos for the short, mid, and long term. Right now, most of the action is in metaverse gaming, but it doesn't mean that gaming cryptos are the best investment for the long haul. If you take a long-term strategic approach, then it's easy to see that the real winners might end up being the blockchains like Ethereum that are the core building blocks for everything that is developed over the next few years.