This was supposed to be the year of the metaverse, right? Remember the $1.000 trillion market opportunity that brands, celebrities and tech companies embraced in 2021, hoping for a big profit in 2022? Instead, the two highest profile cryptocurrencies – The Sandbox and Decentraland are both down more than 90% on the year, and many investors have soured on the metaverse concept.
If these two metaverse cryptocurrencies are hoping to bounce back next year, they need to do something different to get more people spending time in virtual worlds. Until they do, the cryptocurrencies that power these virtual worlds are unlikely to recover anytime soon.
Metaverse or multiverse?
A good starting point is to simply understand what is meant by a metaverse. The original concept of the metaverse is a shared virtual world where people congregate, shop, learn, work and spend time together. Since this was thought to be a $1.000 trillion market opportunity, becoming a dominant player in the metaverse meant immense, untapped wealth. That's why the hopes for Decentraland and The Sandbox were so high two years ago: they seemed like the obvious winners.
But the reality turned out to be very different. A more accurate description of the metaverse might be that of "multiverse." It is a parallel universe of competing metaverse properties, where each cryptocurrency can create a metaverse of its own. Take ApeCoin for example, which now powers the Bored Ape Yacht Club metaverse called Otherside. The Shiba Inu meme coin is also getting into the game, with its own virtual world called SHIB: The Metaverse. As a result, it is increasingly difficult for Decentraland or The Sandbox to win over cryptocurrency investors of the metaverse.
Additionally, almost every video game platform can claim to be part of the metaverse, blurring the line between game and metaverse. This is very easy to see when you look at the nominations for MTV's "Best Metaverse Performance" category, which debuted a few months ago. The nominations are a confusing mix of different video game platforms and tech companies, and neither Decentraland nor The Sandbox are part of it.
For these two cryptocurrencies to take off in 2023, they need to demonstrate that they offer a unique value proposition for users. At the very least, they have to prove that spending hours in their version of the metaverse is a better use of time than binge-watching Netflix's new show.
Should you buy metaverse cryptocurrencies?
Ultimately, the metaverse could one day deliver on its $1.000 trillion promise. But not in 2023. If you take a look at the usage numbers, this becomes clear. During its heyday in early 2022, Decentraland reported 50.000 daily visitors, and the growth potential seemed limitless. Now, according to Decentraland, usage is down by 80%. The "core" users of this metaverse number only 10.000. With all the hype this metaverse has received, one would expect 10x or even 100x that figure.
So, for now, I'm skeptical that either of these metaverse cryptocurrencies can recover in 2023. The novelty effect of the metaverse has worn off, and now we need to see the numbers and metrics backing it up.