Metaverse Investment: Opportunities and Risks in the Trillion-dollar VR Market

Compile: DeepChain

The metaverse continues to expand, with industry giants and up-and-coming entrants vying for a piece of the potentially trillion-dollar pie. Nearly $2 billion has been invested in blockchain-based Metaverse transactions in 2022, according to Cointelegraph Research's venture capital database.

** A 2022 McKinsey report estimated that the metaverse industry could generate as much as $5 trillion in revenue by 2030, an estimate that beat Citi's forecast of $8 to $13 trillion. **These estimates reflect a significant growth of $65.5 billion in the global metaverse market in 2022. To achieve these optimistic forecasts, the Metaverse industry needs to maintain an impressive CAGR of 85%.

Investors will never guess which metaverse wins Cointelegraph's 2023 Metaverse ranking. This blockchain-based Metaverse has more than $61 million in value locked in its smart contracts and has more than 8,000 monthly users.

STRONGER THAN EVER

However, the metaverse landscape is not without its difficulties. Market cap losses have been plaguing industry leaders, with Meta (formerly Facebook) losing 77% of its $800 billion-equivalent market cap between the end of 2021 and 2022. As a result, Meta CEO Mark Zuckerberg plans to cut 21,000 jobs in 2023.

Despite the setbacks, industry giants such as Microsoft, Apple, Nvidia, and Qualcomm are all formulating their Metaverse strategies. Apple's entry into the metaverse is highly anticipated, with its AR/VR headset set to launch in June 2023. Likewise, gaming companies like Epic and Roblox have used the pandemic lockdown to their advantage, successfully delivering Metaverse concerts to millions around the world.

In 2022, M&A and financing in the Metaverse sector increased from $13 billion in 2021 to more than $120 billion, driven by Microsoft's $69 billion acquisition of Activision. The deal trades at an EV/sales multiple of 7.6x and an EV/EBITDA multiple of 20.2x. Although valuation multiples are expected to fall as interest rates rise, investment activity remains strong.

The top blockchain Metaverse projects also attracted a lot of funding. Leading blockchain Metaverses by market capitalization include Sandbox ($1.02 billion), Decentralized ($905 million), and Axie Infinity ($830 million). Sandbox's year-to-date (YTD) performance is 44%. Decentraland’s YTD is 62%. None of them exceed Bitcoin’s 68% year-to-date.

For investors looking for exposure to the metaverse, ETFs such as the Fidelity Metaverse ETF (FMET) and the Round Mountain Metaverse ETF (METV) offer viable options. However, new Cointelegraph research reveals that the majority of token transactions in Metaverse projects are concluded by speculation rather than actual Metaverse usage, a trend that calls for prudent investment.