A multitrillion-dollar virtual opportunity

Charlotte Edwards hated her first experience in the metaverse. 

Last month, she attended Metaverse Fashion Week, a four-day event in Decentraland where many of the biggest brands in the fashion world, like Dolce & Gabbana and Tommy Hilfiger, featured designer clothing for avatars. 

Decentraland isn’t a location anywhere in the real world. It only exists online… as one of the virtual worlds collectively labeled “the metaverse.”

As Charlotte explained in her review of the event, where she described the landscapes as “creepy” and “video game-style,” her virtual character—or avatar—accidentally fell off a yacht at the fashion show. She ended up in the virtual ocean and couldn’t make it back to shore. 

This story might sound ridiculous to you… especially if you’ve never played an online video game. It’s an example of the kind of early-stage blunder that comes with any new technology. 

These kinds of stories illustrate that the metaverse is still in the very early stages of development. But the fashion event highlights why venture capital (VC) funds are investing billions of dollars into the metaverse… and funding the companies fighting for an early foothold.

As I’ll explain, it’s a trend investors should stay open-minded about… especially considering the size of the long-term opportunity…

Billions—or even trillions of dollars—are at stake

Like most tech trends, the long-term future for the metaverse is extremely hazy. Even the definition is a bit vague…

The metaverse combines technologies like virtual reality (VR) and augmented reality (AR) with a mix of other trends like online gaming, blockchain technology, and non-fungible tokens (NFTs) to create immersive new environments that blur the line between the physical and digital world.

So far, the few examples of the metaverse include virtual worlds like The Sandbox and Decentraland—the online world I mentioned above.

Not surprisingly, the initial experience can be hit or miss. (Having your avatar fall off a boat and get stuck in the ocean isn’t a great first impression.) I expect we’ll see plenty of these kinds of stories, where folks poke fun at their early experiences in the metaverse.

Nevertheless, there’s a ton of potential for this trend to become a big part of ours lives, just like the internet, smartphones, video games, social media, and plenty of older technologies. 

In fact, billions of dollars are already pouring into the metaverse…

Less than a month ago, Yuga Labs raised $450 million in a funding round valuing the company at $4 billion. If you’re not familiar with Yuga Labs, it’s the company behind the popular “Bored Ape” non-fungible tokens (NFTs). Bored Ape images have surged in popularity over the past year… and have generated more than $250 million worth of sales over the past 30 days. Yuga Labs plans to use the money to build its own version of the metaverse, called “Otherside.” The long-term goal is to create a virtual world built around its dominant position in NFTs. 

And in January, metaverse gaming company Animoca Brands raised $360 million, putting the company’s total valuation around $5 billion. Animoca owns The Sandbox, a popular open-world game that functions as a metaverse where players can own blockchain-based digital assets. 

One of the core features of Decentraland and The Sandbox is the ability for users to buy “land” in these virtual worlds. In fact, metaverse land sales topped $500 million last year… and are expected to nearly double this year. Keep in mind, there are a lot of savvy investors behind these multimillion-dollar deals. They see the long-term potential for these virtual worlds to attract millions of users, just like video games and social media did in recent decades. 

JPMorgan Chase, the biggest bank in the U.S., believes the metaverse will be a trillion-dollar annual revenue opportunity. It’s also the first bank to have a presence in the metaverse… after it recently opened its own lounge in Metajuku mall in Decentraland.

Analysts at Citibank think the metaverse could be even bigger. They recently forecasted these virtual worlds will have five billion users and be worth $8–13 trillion by 2030. 

Obviously, there’s a long way to go. But the foundation is already being built. 

It’s been about six months since Mark Zuckerberg announced Facebook would change its name to Meta as part of its new focus on this emerging opportunity. Meanwhile, plenty of other big names are jumping into the metaverse…

A few months ago, apparel giant Nike bought a virtual shoe company that lets consumers buy NFT shoes. 

And last week, Sony and KIRKBI (the company that owns The LEGO Group) each invested $1 billion in Epic Games, the company behind Fortnite. The investments are directly linked to Epic’s metaverse development project. And The LEGO Group said it’s partnering with Epic to build its own family-friendly metaverse.

Put simply, the metaverse is a huge opportunity for any company that wants to promote its brand and engage with younger customers. That’s why everyone from fashion companies to banks are getting involved. 

And as I mentioned earlier, the early experiences can be a bit awkward and ripe for criticism. For example, Chipotle allows you to make your own burrito in the metaverse… which you can’t eat.  

But, while the metaverse might sound ridiculous, the simple fact is that massive amounts of money are already pouring into this trend… and investors should consider gaining exposure to this space now. 

Meta (FB) is an easy way for investors to benefit as the metaverse unfolds… but if you’re looking to invest in under-the-radar metaverse and other digital asset companies with huge upside, check out Crypto Intelligence.

Daniel Creech is a Curzio Research analyst with over a decade of experience. He writes on macro trends, large- and small-cap stocks, and digital securities. He’s a regular contributor to Wall Street Unplugged, Curzio Crypto, Curzio Research Advisory, and The Dollar Stock Club.