Trading and Investing in the Metaverse

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Written By
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Written By
Dan Buckley
Dan Buckley is an US-based trader, consultant, and part-time writer with a background in macroeconomics and mathematical finance. He trades and writes about a variety of asset classes, including equities, fixed income, commodities, currencies, and interest rates. As a writer, his goal is to explain trading and finance concepts in levels of detail that could appeal to a range of audiences, from novice traders to those with more experienced backgrounds.
Trading and Investing in the Metaverse

In this article, we cover trading and investing in the metaverse.

But first, what is the metaverse?

The metaverse is a space where users of a certain platform can interact in a computer-generated virtual-reality environment with other users.

The metaverse is making a big push as the next big tech trend.

Facebook even went so far as to rebrand itself as Meta Platforms (or Meta, for short) in October 2021 and hired 10,000 people in Europe to help build it. Many will be vying for leadership in this nascent industry.

But what does investing in the metaverse mean? Investing in the metaverse is essentially investing in virtual reality (VR).

VR has been around for a while but has only recently started to become mainstream.

The Oculus Rift, HTC Vive, and Sony Playstation VR have all helped to push VR forward. Facebook bought virtual reality platform Oculus for $2 billion and Microsoft paid $2.5 billion million for Minecraft developer Mojang.

Both of these deals were all the way back in 2014 and both were indications that these companies see virtual reality as a major platform in the future.

Metaverse itself is purposefully a vague term.

On social media and Instagram people have become accustomed to scrolling. The metaverse is now more about going from “scrolling to strolling” in the context of a 3D world, or exploring new virtual worlds via avatars.

Investors want to get in on the ground floor of this new industry of sorts because they see its potential.

Traders also want to get in on public companies leading the charge because it represents a potential source of profits.

In a different article, we identified some of the top public companies leading the charge in virtual reality and the metaverse.

What makes the VR and metaverse trend unique

New gaming platforms, in-game monetization, and the increased blending of social media and gaming is fueling new trends in the tech and gaming industries.

The metaverse and virtual reality is a booming industry and this is something for traders and investors to watch.

There are new opportunities and investing in the metaverse can result in quality returns.

Some examples of investing in the metaverse:

  • investing by purchasing shares in companies branching into the metaverse, gaming, and VR
  • developing products and services for the metaverse
  • creating programs and games that operate within the metaverse/virtual reality environments
  • productivity applications

Facebook renaming itself Meta Platforms officially marked the pivot to the metaverse. 

Co-founder and CEO Mark Zuckerberg said at the time that he sees the metaverse as “the successor to the mobile internet.” 

This pivot also conveniently coincided with Facebook’s scandals around privacy and politics continuing. 

But that also occurred before a series of events combined to slow the global economy and hurt the online advertising market, which the metaverse will still be dependent on, much like the popular social network that led to Meta’s ascent.


Gaming as the next battleground

Gaming is becoming the next battleground for big tech.

Due to live operations and in-app purchases, games are providing a more predictable, recurring source of revenue. 

People are playing games for longer and spending more money on the games themselves. Moreover, gaming has become a career or source of side income for some and not merely a hobby.

M&A is on the rise

Consolidation is picking up as gaming companies merge to get larger. At the same time, new entrants snap up gaming businesses to establish a presence in the sector.

Games are the pathway to the metaverse

As big tech companies strategically think about what is the next big thing that could really move the needle for their businesses, games can be part of this pathway.

With an ongoing transition to Web 3.0, new platforms, services, and products are likely to be created. 

Every time there’s been a transition, it has meant that new platforms were created. 

So there are new companies that become important entities of that particular era of computing or the web at the time. New monetization models also get created.

Companies like Facebook are currently trying to adapt, even going so far as to rename themselves (e.g., Meta Platforms), but whether they successfully evolve remains to be determined.


The gaming industry’s evolution

Gaming is one of the first applications of the metaverse. Both serve the same entertainment and “escapism” element.

Gaming has been an important vertical within the entertainment sector for a long time.

But Covid-19 fueled outsize growth in the industry, like many digital products and services.

Morgan Stanley estimates that 50 million Americans took up gaming in the main pandemic year (2020), a 31 percent increase from the previous year’s 38 million. The two years before that grew a more modest  7 percent year-over-year.

Because pandemics are generally short-lived, the y/y growth figures will regress. As economies and travel reopen, people will spend less time in virtual reality, holding all else equal.

But at the same time, some of the secular trends in the gaming industry are likely to remain.

For example:

a) Players can play with, connect with, and compete with gamers all over the world. This represents a large and increasing global consumer market.

b) Not only is the number of gamers increasing, but the time spent on gaming is increasing as well.

c) Increasing usage goes hand-in-hand with in-game monetization and news forms of microtransactions.

d) The industry is consolidating, with the top five game companies taking up a larger and larger market share.

e) There is an increasing trend of gaming companies investing in and acquiring other gaming companies.

f) Esports is growing in popularity and represents a large opportunity.

g) Mobile gaming is growing rapidly.

h) Augmented reality (AR) and virtual reality (VR) are becoming more popular and the main technologies on which the metaverse is based.

The metaverse and virtual reality provide opportunities for all of the above trends, as well as new ones.

It’s still early days for the metaverse and virtual reality industry and there are many opportunities for investors. As the industry grows, so too will the number of opportunities and ways to make money from it.


Developments for markets to watch looking forward

For participants in liquid markets, these main developments may be worth watching:

The convergence of gaming and social media

The merging of social media and gaming is one of the key elements behind the rise of virtual reality and the metaverse.

Despite the notion or stereotype that gaming is an outlet that avoids social interaction, many gaming enthusiasts use gaming as a way to make and build social relationships.

1) Gaming is popular across all ages and demographics

Half of all US residents have been involved in some form of video game or virtual reality gameplay since the start of Covid-19 in 2020 whether on a gaming console, computer, or mobile device/smartphone.

2) The social part of gaming is important among younger gamers

More than one-quarter of under-35 gamers say gaming provides a better means to connect socially than social media itself.

3) Socialization and entertainment are equally important for 30 percent of gamers

Entertainment is the main motivation behind gaming. But social connection is an increasingly important aspect.

Overall, these trends show an increasing merger between gaming and social media.

This is likely to grow the popularity of platforms that combine social media and gaming and accelerate the trend of platforms that provide digital experiences immersed with virtual and augmented reality.

New platforms, new consoles, new games

Many new consoles have recently come out, which offers the chance for game developers to produce new titles.

New consoles, with better processors, better visual resolution, and better storage are enabling game studios to re-release classic popular games, but with enhanced gameplay.

More console games are being adapted for mobile, providing another opportunity for game makers. Many of the most popular mobile games today are mobile versions of common console games.

The popularity of these consoles and promotion of the games that go with them (classic and new games) is likely to drive user spending going forward.

And naturally, gaming is similar to other types of online businesses in that they are not immune from the risks associated with economies opening up and people spending less of their time in the digital world.

But given gaming’s increasing interconnection with social media and the ability to monetize this engagement, the industry could have a lot of secular trends going for it even if and when pandemics and virus variants are no longer a factor or a tail risk on economies.

In-game monetization

In-game monetization is another big trend.

The social component of gaming works into the microtransaction aspect of the monetization process.

In-game purchases provide gamers a chance to increase their competitiveness, connect with others, or express themselves in some way.

It’s not totally unlike people buying clothing, jewelry, cars, real estate, and other purchases in real life as a matter of “fashion” or to convey status.

Mobile gaming often involves buying ad-free gaming, new lives, powering up play, and so on.

Console gaming often involves buying weapons to improve their gameplay and other status symbols to show off to other gamers.

Metaverse gaming is even more notorious on the status front. Some players will speculate on virtual real estate and is one example that can be even more lucrative than traditional gaming monetization.

Overall, these transactions work to improve user engagement in-game and across platforms and can help produce long-term revenue growth within the social media, virtual reality, and metaverse space.


Can VR and the metaverse help productivity?

Many might be thinking – doesn’t this metaverse concept seem like a huge waste of time?

People are already busy. While gaming and entertainment are an important part of many people’s lives, does living in a virtual world or many virtual worlds and spending money on virtual real estate and virtual goods and services actually add to the productivity of society?

Facebook and others have tried to sell the public on the productivity concept, but it’s still a work in progress.

Many people will need to be convinced that they can actually earn something, learn something, or do something more efficiently from their time spent in virtual reality to be a part of it.

People now own various forms of digital assets and digital currencies, like cryptocurrency and NFTs.

Many have turned their online gaming time into careers by streaming through Twitch, YouTube, and other platforms.

This is one element that metaverse and VR providers need to harp on – i.e., that there’s actually value to be had from this and that it’s not just a form of idle downtime.

Ownership and earning from that ownership will be what many are most interested in.

Longer-term will be the focus on efficiency and task completion.

Virtual reality, and eventually the metaverse, may provide a means for people to complete tasks or projects in a fraction of the time that it would take them to do so in the real world.

This is something that is being actively pursued by some companies who are looking to use VR for training employees and surgeons. (IBM is an example.)

There are other use cases like architecture, car manufacturing, design, and other applications where VR can be used as a collaborative and efficiency software tool.

In these cases, businesses can use VR to save resources (time and money).

While it’s still the early days for VR- and metaverse-based productivity gains, it’s clear that there is potential there that hasn’t been fully explored.

It will help bring on people who aren’t interested in the entertainment, gaming, and digital asset aspect of it all to help broaden its appeal.

How does blockchain impact VR, the metaverse, and virtual economy?

Cryptocurrencies, NFTs, and digital assets have helped open up an entirely new market for traders and investors who are looking for new stores of value.

They can also provide ways to enter into the VR space other than by investing in gaming or social media.

Blockchain can help:

  • track ownership and keep accurate records
  • provide a way for companies to distribute their products (mostly startups and those in the tech or fintech space)
  • manage distributed teams around the world (including contractors)
  • enable companies to form communities around digital assets
  • help create new business models, and so on.

So there are opportunities for investing in projects that can logically integrate blockchain, virtual reality, and the metaverse into things that people want and will pay for.

There will also be lots of new VR-based infrastructure.

What are some different investing angles?

There are several different investing angles that will be possible within the metaverse.

It’s unclear what will happen over time.

For example, investing in crypto exchanges and/or lending platforms that invest in tokens related to different applications has potential.

This can go along with investing in other forms of virtual reality technology (such as gaming) and entertainment companies that are investing in the metaverse concept because it could enable them to increase their user base looking forward.

So there will be opportunities such as the following:

  • companies that are creating tools for VR developers
  • entities having to do with NFTs and gaming coins/tokens used by gamers (that will, in turn, work into the metaverse concept)
  • crypto firms investing in digital assets (such as crypto exchanges investing in tokenized securities)
  • entertainment companies that are pushing resources into forms of entertainment that tap into the metaverse concept
  • lending platforms investing in tokens related to different applications

The idea is that investing in the metaverse will be something that resonates with people who are also investing in blockchain, digital assets, NFTs, augmented reality, and virtual reality because it’s a natural extension of those things.

In other words, the metaverse can potentially be integrated into these newer types of investments.

It could also help lead to the creation of new digital asset concepts that haven’t been commercialized before. This could include things like investing or developing games based on different types of virtual real estate (e.g., virtual home, virtual islands).

We’re still at an early stage here where many of these ventures are getting off the ground, but investing in the metaverse is something that should gain more attention as time goes on.

Can the metaverse reduce barriers to earning?

There are avenues of potential.

For example, Axie Infinity is an ethereum-based game where players look to convert their virtual assets into tokens that can then be sold on third-party exchanges.

The angle right now is on the entertainment, gaming, and potential earning aspect.

It currently isn’t centered on productivity applications.

Will Facebook have the main technology that the metaverse is based on?

It’s unknown. Facebook obviously wants that to be the case, but others in the industry are skeptical.

But the metaverse, or at least any form of virtual reality, will likely need to evolve to have specific, useful applications in the real world.

If it fails to do so, then it may be no different from another gaming and entertainment angle, and any earning activity within the metaverse mostly speculative (e.g., bidding on virtual real estate).


Trading and Investing in the Metaverse – FAQs

What is the metaverse?

The metaverse is a virtual reality platform that allows users to interact with each other and create content.

It is also a term used to describe the extended reality created by combining both virtual reality and augmented reality.

What can I do in the metaverse?

In the metaverse, you can socialize with other users, play games, create content, and more.

You can also use the metaverse to trade virtual assets and currency.

How do I get started in the metaverse?

To get started in the metaverse, you will need a computer or mobile device that is compatible with virtual reality technology.

What are the benefits of trading in the metaverse?

There are many benefits to trading in the metaverse, including:

  • Access to a global market of buyers and sellers
  • 24/7 trading hours (similar to cryptocurrency)
  • Potentially lower transaction costs than traditional markets
  • Potentially increased privacy and security
  • The ability to trade a wide variety of assets, including virtual currency, digital art, and more.

Related: 17+ Unique Hedge Fund Investments (That You Can Consider Too)

What’s an example of a metaverse gaming stock?

Examples of metaverse gaming stocks include:

  • Meta (META)
  • Roblox Corporation (RBLX)
  • Unity Technologies (U)
  • Nvidia (NVDA)
  • Hong Kong NetEase Interactive Entertainment Limited (NTES)
  • Immersion Corporation (IMMR)
  • Bilibili (BILI) or (BLBLF)
  • Vuzix (VUZI)
  • CrowdStrike (CRWD)
  • Take-Two Interactive (TTWO)


Conclusion – Trading and Investing in the Metaverse

There are many reasons to consider virtual reality and the metaverse as part of the plans for your portfolio.

It’s a platform on which there’s the potential for lots of new innovation even if those ideas aren’t yet crystallized let alone executed. Few companies have elaborated clear plans on how they plan to do this.

The industry is still young and has a lot of potential for growth.

Both VR and the metaverse have the potential to help with productivity by providing new ways to do tasks and learn new information.

Microtransactions within games and other virtual worlds can provide a new form of revenue for social media companies and others investing in VR and the metaverse.

People are already spending money on digital assets, like cryptocurrency and NFTs. So there is an established market for these types of investments.

The metaverse could also reduce barriers to earning, as some platforms already show.

It’s still unclear which company or companies will have the lead in the technology powering the metaverse, but many are investing heavily in it through new virtual reality infrastructure.

We’re still at an early stage currently, but investing in virtual reality becomes even more interesting when considering that companies are just starting to tap into its earning potential.

Blockchain can potentially help increase interest in investing in the metaverse given it has opened up new doors for people looking to invest in digital assets and other related concepts beyond investing directly in cryptocurrencies themselves.