The Decentraland (MANA-USD) token prices rose more than 11% in 24 hours to Tuesday morning to trade above $3 per token, and the cryptocurrency could rise some more — its fundamental indicators seem to predict.
Decentraland is an Ethereum (ETH-USD) based protocol that powers a metaverse, a virtual reality platform. Its native token, MANA, has a fully diluted market capitalization of $6.7 billion. Ranked #29 cryptocurrency asset by market capitalization, the token lost nearly half its peak value during a market selloff since December, but it has been on a recovery trend since late January.
MANA-USD is used to pay for virtual plots of land on the platform, as well as to pay for real goods and services in the real world. Interestingly, institutional demand for virtual real estate remains strong in 2022, and MANA could enjoy strong demand and appreciate in value as the metaverse gains popularity.
3 Reasons Decentraland Could Be a Good Play Right Now
I am bullish on the prospects of Decentraland’s MANA in 2022 because recent fundamental data reveals the following:
- Demand for scarce virtual real estate, including on Decentraland, is rising in 2022;
- Developer activity on the platform keeps increasing in 2022, and
- Holding on for dear lifers (HODLers) keep holding during turbulent times.
Let’s take a closer look.
Rising Demand for Scarce Virtual Real Estate
A “flood” of institutional investors on metaverses is driving severe price inflation on virtual real estate. Fortune Media reported that the cheapest available real estate on popular metaverses was worth more than $13,000 by January this year. The metaverse land grab has clearly continued into this year with more institutional investors entering the market.
Last month, global blockchain-based non-fungible token (NFT) art auction house Portion bought virtual real estate in Decentraland for about $1.2 million after paying 425,000 MANA for the “prime located” piece which lies close to “foot traffic.” The platform has attracted big-name brands to its metaverse, and remains a top contender in virtual real estate sales, competing against Sandbox (SAND-USD) and other upcoming metaverses.
Corporations are putting the purchased land to some good use.
Scarce Land and Web 3.0
For example, global smartphone and electronics giant Samsung Electronics debuted on Decentraland’s metaverse last month after building an entire mini-city called 837X from which the company live-streamed the launch of its latest flagship smartphone, the Galaxy S22. The debut was accompanied by an announced giveaway of what Samsung calls “environmentally friendly” non-fungible tokens (NFTs) on the virtual platform on Valentine’s Day.
Given higher investments and the increasing usability of the virtual spaces as the new decentralized web (Web 3.0) emerges, real estate values could continue to rise.
Most noteworthy, land availability on the platforms is artificially limited. Sandbox will only make available 166,464 parcels of “land,” while Decentraland has a limited supply of just 90,601 pieces of virtual land. Virtual land is indeed very scarce, and deep-pocketed institutional investors are in a land-grabbing mode.
Real estate on Decentraland, one of the oldest metaverse spaces, is paid for using its native token; MANA-USD. New investors may demand more tokens as the virtual world’s economy grows, and the token’s price could continue to recover this year.
Development Activity is Increasing
The Decentraland protocol has enjoyed increased developer activity over the past several months, and the total time committed by application developers on the platform has been increasing so far in 2022.
Higher developer commitment to any blockchain project (and any other software platform) increases the product’s success in bringing forth usable features, improved functionality, and efficiency.
As Santiment app data shows, development activity and contributor counts are increasing.
The blockchain and application developer commitment and activity on the Decentraland platform are still growing. The Santiment data analytics platform showed there were as many as 26 developers actively working on the platform on Feb. 14, up from just two developers at the beginning of this year.
Persistent and consistent commitment by the architects and builders of a product enhances its success, features and enhances its chances to outcompete rival metaverse offerings.
In other words, there are ever-increasing prospects for Decentraland to remain a successful, busy ecosystem, with high community activity and engagement. Such attributes make MANA-USD more attractive to hold as a long-term speculative investment.
Investors Are Holding Onto the Token
The number of investor accounts actively trading MANA-USD is declining since mid-December last year. This remains largely true even as the token’s price rallied between Jan. 23 and Feb. 8 this year.
It’s highly likely that the new investors who bought tokens during the 2021 crypto rally are HODLing. They reasonably expect to realize some profit in the long term when the token’s value increases — again.
Alternatively, one could propose that the majority of new MANA investors are mostly avoiding panic sales and profit-taking when the token price goes down. Data on Coinmarketcap reveals that about 60% of holders are currently in profit right now. Further, large holders hold about 81% of the total tokens available.
It seems like a much “safer” bet to HODL the token alongside others at this time. The token could be another pure Web 3.0 play to make in 2022.
Beware the Risks With Decentraland
Cryptocurrencies like Decentraland’s MANA have some fighting chance to remain resilient assets as the metaverse gains more functionality. However, the entire group of financial assets is extremely volatile and increases the risk of significant losses in an investment portfolio. Investors should take care to evaluate practical risk appetite and their personal capacity to absorb potential high losses before making any moves.
Further, it’s now clear that cryptocurrencies are not yet a hedge against stock market losses. The two asset classes have risen and fallen together during periods of enthusiasm and market euphoria. Such a positive correlation amplifies total portfolio risk as investors add cryptocurrencies to retirement portfolios.
That said, although cryptos have been riskier than stocks lately, they have historically offered lucrative opportunities for quick returns to the “lucky” risk-takers. Past performance may not predict future returns, but MANA has some potential to give a winning trade.
On the date of publication, Brian Paradza 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.
Brian Paradza is an investing enthusiast who was awarded the CFA Charter in 2019. A strong believer in fundamentals-based long-term investing, Brian learns from gurus like Warren Buffett but acknowledges human behavioral tendencies that drive short-term “madness.” You may find him inquisitive as he examines tech investing opportunities, cannabis, blockchains, and the new cryptocurrencies asset class.