As the cryptocurrency market stabilizes after a very volatile couple of weeks, investors are clearly looking at this sector as a means to take a risky approach to the markets. The overall cryptocurrency market has continued its nice rally, surging more than 5% in just the last week. That said, within the cryptocurrency sector, some tokens are delivering significant outperformance today.
As of 10.00am ET, three tokens that have largely outperformed the market are Cronos (CRO), The Sandbox (SAND), and Axie Infinity (AXS). These tokens have seen 24-hour moves of 9,3%, 7,1% and 21,4% respectively.
In particular, Cronos, the native token of the crypto.com exchange, has been among the most heavily traded cryptocurrencies since the FTX crash. As a result, today's rally could indicate that investor sentiment towards cryptocurrency exchanges is taking on a more bullish tone.
The Sandbox and Axie Infinity, two popular blockchain-based metaverse games, have also seen growing speculative interest of late. In particular, today's impressive rally in Axie Infinity appears to be tied to a surge in trading volume following the announcement of greater decentralization and community control over its strategic direction.
What are the increases due to?
Interestingly, all three of these cryptocurrency projects have ties to the metaverse. Cronos has also been looking to join the metaverse action with the launch of the so-called CronosVerse and its first metaverse party last month. So it seems that most of today's rally of these three tokens is related to the increase in interest in cryptocurrency-based metaverse projects.
Among the more speculative areas of the cryptocurrency market – which is typically quite speculative for most investors – blockchain-based metaverse projects have exhibited extreme volatility since their inception. As a result, among those looking for a way to gain more exposure to what could be a short-term rally, these tokens are generating significant interest.
What will happen now?
The metaverse has lost much of its appeal among the growth investors. Whether it's stocks or cryptocurrencies, the metaverse has not delivered the desired results. It is therefore a fundamentally difficult space to assess, given the lack of confidence in future growth rates.
That said, with broader bullish sentiment forming in the markets ahead of next week's upcoming Federal Reserve meeting, investors of all types appear to be looking for ways to play on what could be a rally to tear towards the end of the year. Seasonally, this tends to be a strong moment for risk assets. Therefore, growth sub-sectors that can outperform during this window are what many investors seem to be looking for right now.
Depending on the investor's time horizon, these metaverse tokens can be attractive. While I believe this short-term rally could turn out to be just another bear market rebound, it is arguable that if the metaverse turns out to be what many believers say it will, the long-term upside potential will indeed be impressive. So if you are wondering if these tokens are worth investing in right now, it is a matter of risk tolerance.