Crypto bulls, social media junkies and tech futurists alike are among those who believe the metaverse is the next industry to boom. Blockchain technology is enabling users to take their social presence beyond the two-dimensional realm and into virtual reality; more importantly, it’s allowing the users themselves to set the rules and govern the platforms on which they spend their time. But recently, these cryptos that many are calling the future of social networking are in turmoil. Why are metaverse cryptos down today? The industry could be seeing a correction as investors realize the metaverse isn’t coming as soon as they had thought.
Most every cryptocurrency is on the skids today. The market is trending down in the wake of a recent correction in Bitcoin (CCC:BTC-USD) prices; the coin is currently trading below $50,000 after reaching a high of near $70,000 in recent months. However, one industry that’s bearing the punishment more than others is the metaverse.
Metaverse cryptos have been white-hot since October. Facebook’s rebrand to Meta Platforms (NASDAQ:FB), coupled with its teaser video for a coming metaverse project, brought with it a vast interest in blockchain based metaverses. The boost in publicity sent plays such as Decentraland (CCC:MANA-USD) and Axie Infinity (CCC:AXS-USD) skyrocketing. Things continue to gather steam as other networks like Sandbox (CCC:SAND-USD) begin to roll out their first iterations of their own virtual reality platforms.
Why Are Metaverse Cryptos Down Today? Momentum Slows as Short-Term Investors Make Their Exits.
These plays continue to build interest, but in recent days, their values have been stagnating, or even dropping. MANA is up 2% on the day. But, since reaching an all-time high on Nov. 25, prices are tanking over 37%. Close competitor SAND is dropping at the same rate in the same timeframe. Meanwhile, AXS, which presents a different take on the metaverse, is losing 36% since its early November high. Why are metaverse cryptos down today?
As CoinDesk points out, these losses can be attributed primarily to an exhausted market. In talking with Lucas Outumoro of IntotheBlock, it reports that these losses can be largely associated with short-term investors. Seeing as the metaverse is still very much in its infancy, the assets are highly speculative and ripe for volatility; that’s something that short-term investors would resonate with. Now that some of the hype is wearing off, many of these short-term buyers are taking their profits and putting them elsewhere.
Additionally, the site notes that because the class of assets is still in its infancy, the final products are still a ways off as well. Sure, one can hop onto Decentraland and play games or go to an event, or buy land in Sandbox for their own personal development. However, mainstream adoption is not exactly there yet. More companies will begin utilizing the metaverse, and more people will attain the means to dabble there themselves. Until then, it remains a very niche class of technology. One can expect metaverse cryptos to be a savvy long-term investment. But, as this correction is showing, short-term investors just don’t see an immediate reason to continue holding yet.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.