Is Now the Right Time to Buy Virtual Land?

With virtual land prices in the doldrums now might be a good time to pile in.

Image by Garry Killian on Freepik

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Mark Twain the legendary American writer once said ‘buy land they’re not making it any more’.

That sentiment has stood the test of time. However one wonders whether Mr. Twain would hold the same view if he had been introduced to the concept of virtual land.

What is virtual land or as it is often referred to as, virtual real estate?

For an explanation we must start with a definition of the metaverse? Put simply the metaverse is a virtual-reality space in which users can interact with a computer-generated environment and other users.

These virtual worlds consist of land which can be purchased by users which can then be developed into games, retail stores, entertainment venues, casinos, in fact anything you find in the real world.

Big brands have been buying up land in these virtual worlds including HSBC, McDonalds, Pepsi, Nike and Samsung. Buying land in the metaverse is open to everyone, not just the big brands. That is why it represents such a unique opportunity and an affordable one.

There are a number of virtual worlds which you can buy land in, including Decentraland, The Sandbox and Otherside.

Land prices start at under $2,000 (priced in ETH) for the top three virtual worlds (Otherside, Decentraland and The Sandbox). Owners can develop or even lease their plot to someone else to develop whilst they receive income from their land.

Now for the reality check. Virtual land prices hit a peak in February 2002, since then prices have dropped by up to 92%. It’s a volatile market linked inextricably to the highly risky cryptocurrency market.

However, despite this collapse in virtual land prices the metaverse is still expected to be a trillion dollar market by 2030 according to JP Morgan. More strikingly, McKinsey predicts the virtual real estate market will be a $5 trillion market by 2030. That opportunity has been recognized by Facebook who recently changed its name to Meta. It has invested billions of dollars into their own metaverse Horizon Worlds.

Whilst land prices have taken a big hit recently history tells us that prices are set to rebound. After the dotcom bubble the Nasdaq took 12 years to reach its previous all time high. It then went on to exceed that ATH by over 3 times. We don’t believe however that virtual land’s lost ground is going to take that long to recover for the crypto market has a reputation and a history of moving far quicker than traditional markets.

This means that now could be a good time to consider an investment into virtual land.

But with all investments there are risks which must be considered. Here are a few of the major ones.

● As mentioned before and in contrast to tangible real estate, virtual land is highly volatile. You could lose all your money and you may not be able to sell your asset.

● There are many new virtual worlds popping up. Many of them are scams and most of them will not gain any traction with users.

● Whilst tangible land is scarce virtual land supply can be increased with a change in code. This will always be an unspoken risk overhanging this asset class.

● Location, location, location is as relevant in virtual land as it is with its tangible cousin. Buying land away from the action is going to be cheaper than buying a plot next door to Snoop Dogg’s plot for example and may well be difficult to sell.

● The value of land is closely connected to the popularity of your chosen virtual world. The more players who use it the greater the value of your land.

As the metaverse becomes mainstream and the winners and losers are determined, land prices of the quality virtual worlds are bound to increase. That is why a possible winning strategy may be to focus on the top projects in the space including Decentraland, The Sandbox, Otherside and SHIB: The Metaverse. Of course only the test of time will determine which, if any of these will be still around in a few years.

A high risk strategy would be to buy land in less desirable locations within a virtual world in the hope that the area will become more valuable as big brands move in.

Alternatively investing in land from some of the emerging virtual worlds could be another approach. Even trading these assets for a quick profit could be a possible strategy. However it must be understood that these are all high risk strategies which will lead to losses as there are many many bad actors outside the main metaverse platforms.

With prices down a whopping 90% in some cases this is a great time to take a look at investing in virtual real estate. The metaverse isn’t going anywhere, the big risk is picking the one or two winners that will be standing when the masses eventually start buying their groceries and underwear in their favourite metaverses.

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Not Financial Advice

This article does not constitute financial advice or a recommendation to buy in any way. Always do your own research and never invest more than you can afford to lose. Investing in cryptocurrencies is high risk, and you could lose 100% of your investment. The article should be treated as supplementary information to add to your existing knowledge.