If there was ever a time for a virtual land grab, it was late November through early December. During the week ending December 6, 2021, a remarkable 25% of NFT purchases through NonFungible.com were for digital land in the metaverse, totaling over $300 million. Although sales ratios are shifting a bit as mid-month comes around, there seems to be no stopping NFT real estate purchases.
In the week ending December 12, 2021, The Sandbox was still number four in sales volume, at just over $17 million, and Decentralland was number six, with nearly $10 million. This week, digital land has been displaced by a small number of very-high-profile NFT avatars from popular collections CryptoPunks (112 transactions) and Bored Ape Yacht Club (594 transactions), even though The Sandbox actually had more transactions (1,171) than both combined.
Image source: Getty Images.
Digital real estate as an investment phenomenon
Although I was once absolutely the first person to make my face into a question mark when anyone would ask me "Why do people want real estate in the metaverse?" -- there are actually a lot of valid reasons to believe that digital real estate may become an absolutely hot commodity in the not-too-distant future. The best time to buy any kind of investment is before it becomes a big thing, not after it's already super-crazy expensive, so now is the time if you're going to buy a chunk of the metaverse.
Of course it's wildly speculative.
Of course it's extremely risky.
But the metaverse is already a market that was valued at $44.69 BILLION in 2020. That's "going to space" money right there. And according to some industry experts, the metaverse may be a nearly $600 billion market by 2027.
Although these figures include components of the metaverse besides digital land, like avatars, the 55,637 wallets currently active on NonFungible.com (just one of many NFT sales platforms) point toward something more than a flash in the pan. In the last seven days, the top sale of digital real estate was for $1.041 million dollars, on a lot called EST #4313 in Decentraland.
More modest lots may bring a lot less but can absolutely be profit vehicles. Decentraland LAND# 115792089237316195423570985008687907818220900872783902302729999442441003859908, for example, sold December 11, 2021, for $18,265.32, after the seller had picked it up on December 7, 2021, for $17,141.19. The original seller bought that lot from the platform for a mere $120.93 on December 20, 2017. Maybe the same buy-and-hold strategy that works in physical real estate will also pan out for the virtual kind.
Lots in the popular platform The Sandbox are generally priced much more modestly than the more expensive lots in Decentraland (location, location, location), but they have also been quite profitable for people who were ahead of the curve enough to buy before the platform took off earlier this year. LAND #34763, for example, resold on December 11, 2021, for $18,243.90. The seller had purchased it a year prior (on November 13, 2020) for $175.36.
Remember that the digital economy is an economy unto itself
From these examples, it certainly sounds like there's no place to go but up with virtual real estate, but there's an important caveat to investing in the metaverse: The digital economy is not the same as the real-world economy, and a win doesn't always look like a win from the outside. Most people transacting in the digital world are doing it in some type of cryptocurrency, and cryptocurrency values can be absolute roller coaster rides.
A lot we didn't talk about was the second-most-valuable sale for the week on Decentraland, EST #985. In fiat currency (that is, American dollars and cents), it sold for $897,500, after having been purchased by the investor for a whopping $1.085 million. The investor held this property just two weeks, buying on November 28, 2021, and selling on December 10, 2021.
In physical real estate think, we'd all collectively scream, "Of course they lost money, that's a no brainer." But, this isn't the physical world. This is the metaverse. And while they lost a huge wad of paper money, the thing I didn't tell you is that they actually made a 40,000 MANA (the currency of Decentraland (MANA -1.53%)) profit, having purchased it for 210,000 MANA and then sold it for 250,000 MANA.
Look, I know it doesn't seem like it makes sense, but again, the digital economy is a whole different place, and that's important to keep in mind while dealing with the metaverse. This investor made a significant profit, even if it doesn't look like it in a way we automatically recognize. The only reason the fiat price was so much lower was that the value of crypto coins had dropped a bit overall, but it's now recovering. If they were to use that coin to purchase other properties with MANA (and not in dollars), we'd all accept that yes, this was a profitable exercise.
As of the writing of this article, the fiat value of that sale is $920,000, and the indicators point to a continued recovery of the value of MANA. If a person were looking to cash out, this would be the path to success -- all that investor has to do is wait and realize a significant profit, if they're brave enough. And they certainly seem to be. If they instead chose to grow their MANA, well, that's also a valid path in the metaverse economy.
