Decentraland (MANA-USD), like most cryptocurrencies, has bounced back in recent weeks. After causing last month’s selloff, worries about rising interest rates have eased. Instead of shifting to “risk-off,” investors have warmed back up to this space.
As a result, MANA has largely reversed its January losses. This could continue, if the crypto market recovery carries on. Yes, I’ve talked about how changes in the market environment could mean lower prices ahead for this asset class. Yet, it may not necessarily play out this way. Instead, market changes (i.e. rate hikes) could wind up resulting in a net inflow into crypto, sending names across-the-board to higher prices.
So that means it’s time to buy MANA, right? Not so fast.
There are a few caveats. First, it’s not a given that a crypto comeback happens. The more bearish scenario could still play out. And second, even if the bullish outcome prevails, MANA may not be the best way to play it.
A Brief Overview of Decentraland
Before diving in further, here’s a brief recap of this token — and the story behind its blockchain.
As the name suggests, this crypto is the native token of the Decentraland metaverse. Think Second Life but for the crypto era. Like other virtual reality (VR) universes, not only can you interact within this virtual world, you can also transact within it. That is, you can buy and sell virtual property within the platform. That’s where MANA-USD comes in. It’s the means of exchange for these digital real estate deals.
The Decentraland platform (and its token) have been around for a while. However, it was only recently that it really took off. When Facebook decided to rebrand itself as Meta Platforms (NASDAQ:FB) and go all-in on the metaverse trend, the token skyrocketed in value.
During this time, MANA soared from under $1 to as much as $5.90 per token. Since then, though — with rate hike fears and the meta trend losing momentum — it has struggled. While bouncing back now, MANA remains more than 47% below its all-time high.
Again, some may see its rebound alongside other cryptos as a sign that the recovery will continue. However, that’s not a given. And even if the recovery does continue, there are better ways to play it.
MANA-USD vs. General Cryptos
With Decentraland trending higher again, now may seem like the time to hop in before it returns to its high-water mark. However, there may be two reasons why buying MANA ahead of a possible comeback may not be a risk worth taking.
First, it’s unclear whether the driver of its recent recovery (the crypto market comeback) will continue. On one hand, some market commentators see rising rates as a positive for the asset class. With bonds offering negative returns in this environment, investors may cycle into crypto instead of stocks as they move capital out of traditional fixed-income assets. But on the other hand, U.S. Federal Reserve policy changes could have a more negative impact. Instead of quickly thawing out, the “crypto winter” could get worse. Increased regulation could hurt the space as well.
Secondly, there’s the fact that — given the choice — the more general cryptocurrencies are altogether better picks if you’re bullish on the trend. Think established coins like Bitcoin (BTC-USD) and Ethereum as well as “Ethereum killers” like Cardano, Polygon (MATIC-USD) and Solana (SOL-USD).
With high functionality, far more use cases and institutional investors giving them social proof, these names may have more upside potential than MANA. If the recovery of this asset class continues, Decentraland could still lag behind. The only likely way it will make an outsized move higher is if there’s a “meta mania” encore.
Stick to Other Plays Instead of Decentraland
The jury’s still out whether rising rates will send cryptos even lower — or do the opposite. If you believe the former, now’s not the time to buy any digital assets, whether it be BTC, MANA or even pupcoins like Dogecoin (DOGE-USD).
However, if you’re bullish that the latter will play out? If a rebound does carry on, established cryptos and top altcoins should still provide much better returns than niche names like Decentraland.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.