What is the metaverse and how to invest in it | markets

The metaverse is the fashionable concept in the world of technology and investment. Since Mark Zuckerberg, the founder of Facebook, announced three months ago that the group he runs would be renamed Meta Platforms, interest in this trend has skyrocketed. However, What exactly is the metaverse and how could a retail investor invest in it?

Pierre Bourdin, professor of computer science, multimedia and telecommunications at the Open University of Catalonia (UOC) explains that the metaverse “is a space for the interaction of machines, idealized avatars and a new virtual world where art, architecture, beauty and fiction meet to socialize, shop or do business, thanks to virtual reality and augmented reality”.

Explained in this way, it may seem like a very ethereal concept, so it is better to move on to the examples, although it is still a very incipient phenomenon. In August 2021, the American singer Ariana Grande performed a show concert within the Fortnite gaming platform. More than a million people watched Grande’s avatar perform as she surfed, flew or battled within the virtual environment of Fortnite.

Increasingly, children, adolescents and young people spend many hours connected to internet platforms where they not only play, but also interact with other people.

The bets of the giants

  • microsoft. The company founded by Bill Gates is clear that the future of the Internet lies in virtual reality and electronic games. That is why it is going to spend 60,000 million euros to buy Activision Blizzard (owner of games like Call of Duty, Guitar Hero, World of Warcraft or Candy Crush). It was not his first foray into this world. In 2017 he paid around 2,000 million euros for the Minecraft game.
  • Tencent. The Chinese tech giant has also been exploring the world of electronic games for years. In 2012, it became a shareholder of Epic Games, the developer of Fornite, the most popular game among children and adolescents. In 2021, the firm raised $1 billion to develop “its strategic vision of the metaverse.” It also bought the company Riot Games, developer of the popular League of Legends.

But the metaverse is not only in electronic games. For Zuckerberg, the push into the metaverse will come from the merging of the digital and physical worlds. Instead of consuming the internet through mobile screens, the metaverse will be accessed through virtual reality glasses or high-tech augmented reality, which will project realistic and interactive images on our physical environment.

Virtual reality headsets already allow people to immerse themselves in the digital environment of games, but now augmented reality is taking it a step further, superimposing objects in the real world.

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From the American manager Fidelity they consider that the metaverse could be the future of the mobile internet. “Ten years ago, the internet evolved from something people viewed through a web browser on their computer to an always-on mobile connection that was always with them. Now, the metaverse will see the mobile internet leap out of people’s pockets to become a digital layer of the world around us.”

Víctor Alvargonzález, founding partner of the financial advisory firm Nextep Finance, agrees that the metaverse is going to be the third phase of the digital revolutionafter the appearance of the internet in the 90s of the last century and the rise of smartphones in the 2000s. “The key when investing in the metaverse is all the technologies that will make this virtual universe possible,” he reflects.

Tech equipment companies will be the first to benefit if US giants launch branded augmented reality glasses over the next two to three years. In fact, Facebook has already launched one, but has more ambitious versions in development.

From the Fidelity analysis team they consider that “the initial boost to income will probably be little at first, since the viewers are expected to cost around $ 3,000 and will be out of reach for many. However, the integration of hardware and software should over time lead to higher valuation multiples in some companies.”

Suppliers of key components, such as specific processors, sensors and display drivers, could be the first beneficiaries. Companies that make 3D sensors could see their valuations rise as viewers become less reliant on cameras. Companies that produce processors for 3D graphics, such as the giant Nvidiaand the artificial intelligence engines needed to process the data in real time.

Scott Adam, manager of the American firm black rock, considers that once the new computers and devices are developed “opportunities will begin to appear in accessible services with this new technology, and there will be many computer programming companies that will shape the metaverse”. These companies will contribute to building and developing these new virtual worlds.

In the United States, a stock index has even emerged that brings together the companies that are theoretically best positioned to benefit from this trend. the so-called Ball Metaverse Index includes companies such as the aforementioned Nvidia; Microsoft (which bought the video game giant Activision Blizzard two weeks ago, paying 60,000 million euros); Meta Platform (Facebook parent); Roblox, one of the online gaming platforms with the most players; Unity Software, a company specialized in providing services to video game developers…

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From the stock broker Plus500 they also recommend positioning themselves in 2022 in technology companies such as Apple, Cisco and Intel, “which have also adopted metaverse technology, are well positioned to reap the benefits of increased demand for semiconductor chips, processors and services in the cloud ”.

Víctor Alvargonzález, from Nextep, considers that one of the formulas to invest in the metaverse is through exchange-traded funds (known in the jargon by its acronym in English, ETF). “It seems to me that it is the best formula to be able to take advantage of this third digital revolution,” he says.

What is clear is that the path for the development of this trend is not going to be easy. This week Meta Platforms (Facebook), the great champion of the metaverse, has suffered a setback in the Stock Market, presenting user figures that have defrauded the market, and seeing itself pigeonholed as a social network for people of a certain age. In Wednesday’s session, stocks tumbled 26%, with $230 billion of market capitalization suddenly evaporating.

American companies are not the only ones who want to be part of the metaverse. Several Chinese companies, such as Tencent, Netease and Baidu, are also taking an interest. Tencent is a shareholder of Epic Games, creators of Fortnite, which has its own 3D video game engine and seems to be in a good position to create different ways for customers to move everyday tasks, such as ordering food, buying tickets, taking out insurance or consulting a doctor) to the three-dimensional environment. In addition, the Korean technology company Naver Group already has 200 million metaverse users and 700,000 creators.

At BlackRock and Fidelity they are clear that the metaverse is an opportunity as interesting as it was 20 years ago betting on companies like Google or Facebook. Time will tell.

The Second Derivative: Virtual Cities, NFTs, and Cryptocurrencies

What is the metaverse and how to invest in it

Genesis City It is the first city built with data block technology (blockchain, in jargon). It is a virtual city that has shopping centers, art galleries, and squares and streets where the avatars of the users walk. It was developed by the company Decentraland, which obtained financing in 2017 by issuing a cryptocurrency (it raised 26 million euros) and which is now making a fortune by selling land.

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The city has 900,000 virtual parcels. And two months ago it sold one of the best located to Metaverse, a subsidiary of the German group Tokens.com, which is listed on the Frankfurt Stock Exchange. He paid two million euros. The investor, Andrew Kiguel, assures that this plot is already worth five times more.

The fictional land is located on Fashion Street, where brands such as Gucci, Prada and Ralph Lauren have already opened virtual stores.

It must also be said that Kiguel did not pay exactly with euros or dollars, but with a cryptocurrency called MANA, equivalent to the aforementioned two million euros.

The passion for the metaverse is not just a matter of cryptocurrency fans. At the end of 2021 it was known that the Hong Kong subsidiary of the international consulting firm PriceWaterhouse Coopers (PwC) had invested to buy virtual land in Sandboxto get started in what they call “advice 3.0 for accounting and taxation issues”.

The historic video game brand Atari has also bought in Sandbox, paying three million euros, in what is the largest virtual real estate operation to date.

The problem with all these investments is that they are taking place in assets that are not only unregulated, but whose usefulness and viability are more than questionable.

Another facet of this new passion for so-called digital assets are those known as NFTs. These are the acronym in English for non-expendable, or non-replaceable property. The classic example of non-expendable property is works of art, whose value lies in their originality.

NFTs consist of electronic creations that, thanks to technology blockchain can prove its originality. For example, the founder of Twitter, Jack Dorsey, sold in May 2021 the first message that was published on the social network for 2.9 million dollars. Thanks to data block technology, your buyer can prove that he owns the first tweet.

Now there are creators of electronic art and photographers who sell their creations in NFC format. Even a company, Republic Realm, dedicated to creating virtual mansions that it sells for 15,000 euros.

The most skeptical of these developments remember that the first virtual city, Second Life, was created 19 years ago, and ended in failure. For a time, many companies opened their virtual offices there, but after several years the project did not even exceed one million regular users.


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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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