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Decentraland Is Slowly Building a Following, But Let the Buyer Beware

  • Decentraland (MANA-USD), which is a virtual reality metaverse game, is slowly building a following.
  • This is pushing MANA crypto higher, 48.3% off of its lows, but the crypto is still 20.1% below its year-end price.
  • The fever pitch of virtual land sales may be slowing, as no major plots have sold for millions of dollars as they did in November 2021.
Decentraland logo displayed on smartphone screen, teal background behind the phone

Source: shutterstock.com/Piotr Swat

Decentraland is a virtual reality crypto-powered metaverse game and token that has come down significantly from its highs during fall 2021. For example, MANA crypto peaked briefly at $5.4752 on Nov. 24.

Starting on Nov. 18, Decentraland traded at $4.29 (or higher for about two weeks). That is 57.7% above where Decentraland trades today at $2.782 per MANA token. So the cryptocurrency still has plenty of upside as it slowly recovers.

Where This Leaves MANA Crypto

Decentraland is an Ethereum (ETH-USD)-based game that allows people to simulate life in a metaverse space. It also allows them to buy and sell real estate, including land, rooms, buildings, even whole cities.

This was all very exciting for investors in MANA. In fact, at one point in November 2021, one plot of land sold for a record $2.43 million in Decentraland.

That’s right. Someone paid over $2 million for a virtual, digital-only plot of land in a crypto-powered game. That seems almost unbelievable. But that is what digital currencies and hyper speculation are all about.

In fact, this was over twice the previous record of $913,000 for a Decentraland plot, sold as a non-fungible token (NFT).

Now, just to be clear, the $2.43 million plot of land sale in November 2021 was for 618,000 MANA crypto tokens. Today, at $2.72 apiece, the land value is now worth just $1.68 million. So, in the space of just 5 months, the value of the virtual plot of land has depreciated by 30%.

In a normal real estate market that would be considered a depression-type event. But things are so volatile in cryptocurrencies, and Decentaland in particular, that it is probably not that consequential. This is because the volatility is more or less taken for granted.

Moreover, the investor probably figures that when a bull market in cryptos returns they can probably see another high in the value of their land.

To be sure, this is what speculative investing is all about. The philosophy behind it is nothing more than a “greater fool theory.” That is, the investor in the $2.43 million virtual land plot is hoping eventually to sell their land to a greater fool than themselves.

JPMorgan’s View

Recently, Decentraland got an intellectual and price boost when JPMorgan opened a virtual lounge in Tokyo. Cryptopotato reported on Feb. 10 that the lounge was put in the Metajuku district, a virtual version of Tokyo’s Harajuku shopping district.

This comes after the bank released a report on Feb. 16 on the metaverse world, according to Cryptopotato. The report predicts that the market opportunity could hit $1 trillion in annual revenues in the coming years.

Moreover, JPMorgan bank says that there is already “$54 billion spent annually on virtual goods,” mostly in online games with virtual currencies. The bank says that this is more than double the amount spent on music.

Moreover, one area that is looking very interesting is in-game adverting. The bank says that spending on in-game advertising will top $18 billion by 2027.

What to Do With Decentraland

At this point, given that the crypto seems to be on the mend, those investors who have a speculative bent might consider taking a toehold position. Keep in mind that this is a highly volatile cryptocurrency.

Value investors should take note that there really is no margin of safety with MANA crypto. There are also no defensive characteristics about a possible investment in this cryptocurrency and no reliable valuation metrics. For example, defiLlama.com does not show any TVL (Total Value Locked) statistics for the crypto.

What we do know now on a basic level is that Decentraland’s market capitalization is just over $5 billion. This makes it the 34th largest crypto as measured by Coinmarketcap.com. Decentraland.org does not put out any valuation statistics.

For example, we do not know what the average parcel of land costs, what it is valued at, or what the trend has been in terms of price per square foot or value by geography.

Any other normal real estate firm would try and put out these statistics. So, there is some sort of intellectual abyss here for a rational investor. The bottom line is: Let the buyer beware.

On the date of publication, Mark Hake did not hold (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.

Mark Hake writes about personal finance on mrhake.medium.com, Newsbreak.com and Beehiiv.com.


Article printed from InvestorPlace Media, https://investorplace.com/2022/03/decentraland-is-slowly-building-a-following-but-let-the-buyer-beware/.

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