News hardware NFT: The metaverse is going through a real estate crisis
In 2008, the world experienced the subprime housing crisis. In 2022, the recession is happening this time in the virtual world, more commonly known as the metaverse.
Since 2021, the subject of the metaverse has become a real concept sometimes exceeding the reality of our current digital practices. This interest around the virtual world of tomorrow has been largely highlighted by Meta, formerly Facebook, and its social metaverse project.
The famous 3D environment under the name of metaverse aims to transcribe reality as faithfully as possible. As a result, the notion of ownership has been applied to the metaverse. Indeed, to benefit from its home in the digital world, several metaverses are the subject of sale of digital plot of land in the form of NFT. These tokens can usually be acquired for cryptocurrency.
In a logic of anticipation and profitability, many investors did not want to miss the opportunity. Thus, some have placed their pawns well before a possible mass adoption by buying land or real estate in different more or less known metaverses. These investors bought these lands in the hope of making a profit when the time came.
This excitement around NFTs and the metaverse has represented 500 million dollars in sales for the year 2021. Only, after this metaverse real estate boom, these real estates in the form of non-fungible tokens have suffered a significant loss in value since the beginning of the “crypto winter”.
As Bitcoin, correlated to traditional stock indices, continued to fall throughout 2022, it’s time to take stock. The queen of cryptocurrencies took the entire economy around the web3 in her fall. Thus, altcoins, NFTs, and even metaverse suffered an overall decline in value.
According to WeMeta, a platform dedicated to selling virtual land on different metaverses, real estate transactions on Decentraland and The Sandbox are down 97% since November 2021. Going from 16,000 sales per day to just 2,000 in the space of 8 months, the sector has also seen the prices of goods divide drastically to adapt to demand. Thus, many owners of digital assets find themselves on the straw.
As an example, for the most popular metaverse named Decentraland, then that a piece of land (LAND) cost nearly €17,000 in July 2020, 2 years later it trades around 1.85, ETH or €3,000.
This 3D virtual space supposed to represent the Internet of tomorrow is still in the development phase. Therefore, it is important for companies to lay a sound foundation when the subject is no longer the scene of a speculative bubble. Moreover, this decline in enthusiasm around the metaverse can also have the opposite effect, namely slowing down, or even stopping, the investment and development of projects related to the virtual world of tomorrow. This is the option chosen by Tinder for its Tinderverse.
It is important to specify that the economy of the metaverse is not an isolated case, the young markets are regularly the object of excessive enthusiasm and consequently of extreme volatility. In this context, the sector will have to be given several more years so that it can develop according to user expectations.