Down More Than 90% in 2022, Can These 2 Metaverse Cryptos Bounce Back in 2023?

This was supposed to be the year of the metaverse, right? Remember the “can’t-miss” $1 trillion market opportunity that brands, celebrities, and tech companies embraced in 2021, hoping for a big payoff in 2022? Instead, the two highest-profile metaverse cryptos — The Sandbox (SAND -0.49%) and Decentraland (MANA 0.12%) — are both down more than 90% for the year, and many investors have soured on the metaverse concept.

If these two metaverse cryptos hope to bounce back next year, they need to do something differently to persuade more people to spend time in virtual worlds. Until they do, the crypto tokens powering these virtual worlds are unlikely to recover anytime soon.

Metaverse or multiverse?

A good starting point is simply figuring out what the metaverse is supposed to be. The original concept of the metaverse is a shared virtual world where people hang out, shop, learn, work, and spend time together. Since this was supposed to be a $1 trillion market opportunity, becoming a dominant player in the metaverse meant vast, untapped riches. That’s why hopes were originally so high for both Decentraland and The Sandbox two years ago — these seemed to be the obvious winners.

But the reality turned out to be much different. Instead, a more accurate description of the metaverse might be the “multiverse.” This is a parallel universe of competing metaverse properties, in which any crypto can create a metaverse world of its own. Take, for example, ApeCoin (APE 0.42%), which now powers the Bored Ape Yacht Club’s metaverse world called Otherside. Even meme coin Shiba Inu is getting in on the act, with its own virtual world called SHIB: The Metaverse. As a result, it is getting harder and harder for Decentraland or The Sandbox to win over metaverse crypto investors.

Moreover, just about any video gaming platform can claim to be part of the metaverse, blurring the line between gaming and the metaverse. This is very easy to see if you check out the nominations for MTV’s “Best Metaverse Performance” category, which debuted a few months ago. The nominations are a confusing mix of different video game platforms and tech companies, and neither Decentraland nor The Sandbox was part of the mix. 

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For these two cryptos to take off in 2023, they need to demonstrate that they offer a unique value proposition for users. At the very least, they need to demonstrate that spending hours in their version of the metaverse is a better use of time than binge-watching the newest Netflix show.

Utility for metaverse tokens

Both MANA, the token of Decentraland, and SAND, the token of The Sandbox, are the official currencies of these metaverse worlds. If you want to buy virtual land in Decentraland, for example, then you need to pay for it in MANA, not U.S. dollars. You can also use these currencies to pay for things like wearables for your avatars.

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However, these tokens have almost no value outside of their respective metaverse worlds. It’s not like you can pay your monthly mortgage with metaverse tokens you use to pay for virtual land. Even the non-fungible token (NFT) digital assets created within these worlds have very limited value outside of the metaverse. 

From my perspective, these tokens would become much more valuable if they had more real-world utility. This is a strategy that ApeCoin has executed successfully. There is now a growing ecosystem of Bored Ape products and services where ApeCoin can be used for payment. Moreover, there are new investment opportunities for ApeCoin holders, including the staking of NFTs for passive income.

Should I buy metaverse cryptos?

At the end of the day, the metaverse might one day deliver on its $1 trillion promise. But not in 2023. If you take a look at usage numbers, this becomes clear. During its heyday in early 2022, Decentraland claimed to have 50,000 daily visitors and the upside potential seemed limitless. Now, says Decentraland, usage has fallen off by 80%. There are only 10,000 “core” users of this metaverse world. For all the hype this metaverse world has received, you might expect that figure to be 10 times or even 100 times higher.

So, for now, I’m skeptical that either of these two metaverse cryptos can bounce back in 2023. The novelty effect of the metaverse has worn off, and we now need to see the numbers and metrics to back it all up.