Only eight months ago we were discussing the boom of real estate in the metaverse and its bright, shiny future. US rapper Snoop Dogg replicated his Californian mansion by creating a 144-parcel paradise and then the nine-parcel property next door set a record purchase of $450,000 (£382,000).
However, the rocky state of the world economy has sent ripples into the digital world, with the likes of 3D virtual-world browser-based platform Decentraland and Sandbox, a virtual world where players can build, own and monetise their gaming experiences in the Ethereum blockchain, experiencing their first real price crash.
WeMeta data reveals a continuous drop since February 2022, with prices down 85% and purchase volume falling off a cliff. Virtual land previously bought is now worth next to nothing. That record-breaking purchase of $450,000 could be worth barely $30,000 now.
Cryptocurrencies such as ETH and BTC, used to purchase virtual property, are at half the value of their all-time high and this is reflected in the price drops. The average price of land sold across Decentraland peaked at $37,238 in February 2022. But as of 1 August, costs dropped to an average of $5,163. Sandbox followed the same trend, with the average sale price dipping from $35,500 in January to around $2,800 in August.
While the factors influencing crypto fluctuations are taking their toll, the biggest issue, one intrinsically linked with the very success of the metaverse, comes down to popularity and traffic. If people aren’t using the metaverse and interacting in the virtual spaces, then the spaces themselves don’t hold much value.
As Mitchell Goldberg, postgraduate researcher at the Center for Innovative Finance, University of Basel, says: “It’s an attention economy. People are interested in having the land in places with a lot of foot traffic. But if the attention for the whole world decreases, then the prices for all of these land parcels will decrease.”
Another issue undoubtedly having an effect is the value virtual land holds in an unlimited digital world. Should some sort of limit be introduced to make the space practical and provide a centralised social experience rather than enabling thousands of virtual miles of space? While metaverse land can always be created, companies can’t manufacture the attention.
The concept of the metaverse is the natural evolution of the web. Users are looking for more immersive experiences and virtual real estate provides new possibilities. Buildings that take on new creative forms that stretch the imagination could provide reference points and familiar spaces for users to meet and interact. These same spaces could have multiple uses and switch between homes, venues, nightclubs etc. Future potential for brands within this space is huge. Digital headquarters, events and commerce could all result in waves of influence and brand building.
Despite recent crashes, the projected metaverse value is still tipped to be $1.6bn by 2030. Tomas Nascisonis, chief executive of Crypto House Capital, says: “Metaverse land prices have fallen recently. However, economic factors are temporary. The metaverse of the future will still grow.”
It is too early to tell if this recent crash could provide the perfect opportunity to snap up land at a fraction of its potential price as the metaverse is only just gaining momentum. Only time will tell if this is the long-term investment everyone hopes it will be.
Josh Pattison is head of technology at SHB Real Estate
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