Metaverse land prices are holding up in the current market climate

Metaverse land prices are holding up in the current market climate

The key to the sustainability of the metaverse could lie in the virtual real estate market, suggests Chainalysis.

Blockchain analyst's latest State of Web3 report found The growth of blockchain-based virtual real estate (VRE) prices has surpassed that of physical real estate. AER prices exploded by 879% from September 2019 to March 2022, while real property prices increased by 39% over the same period.

Of course, virtual and physical real estate are not the same thing. People need land, houses and buildings to live, work, learn and sleep. Metaverse properties, on the other hand, are all about retail, recreation and social activities.

According to Chainalysis economist Ethan McMahon, any correlation between physical and virtual real estate markets could be attributed to their relative maturities: virtual real estate is only a few years old and therefore has much higher volatility than its more mature counterpart.

One of the key drivers of NFT land demand cited by the report is access to private events and token-gated communities. Demand leads directly to the sale of virtual real estate.

Bored Ape Yacht Club, for example, which has been a leader in bundling its NFTs with socialization entertainment for its community members, raised $320 million worth of Ether in its first weekend from its Otherdeed land sales for its upcoming Otherside metaverse. According to Yuga Labs, it was “many times the largest NFT coin in history,” with sales traffic triggering sky-high gas fees on the Ethereum mainnet.

Otherdeed for Otherside has the largest cumulative total land sales value in Metaverse real estate at approximately $853.6 million at the time of publication. according to to Dune Analytics. Decentraland is in second place with approximately $378.6 million and The Sandbox is in third place with a cumulative sales value of $227 million.

A growing number of major companies are buying up Metaverse land and opening stores, including Adidas, Burberry, Gucci, Nike, Samsung and Louis Vuitton. JPMorgan was the first bank to enter Decentraland by signing a one-year real estate lease in February, and HSBC followed a month later with a purchased property.

Back then JPMorgan published a report that envisions Metaverse market opportunities worth over $1 trillion in annual revenue by 2030.

Real-world trends are mapped to metaverse markets

McMahon told Blockworks that there is "massive" potential in this area, not just for game developers, but also for individuals who own characters and items they play with.

Marketers and companies looking to target gamers could also benefit from an ever-changing array of advertising options.

Brands seem unwilling to risk being left behind. The largest VRE sale to date was made by the financial publisher Curzio Research, expenditure $5 million for a piece of virtual land in May in the TCG World metaverse running on Binance Smart Chain (BSC). In the second largest deal, Republic Realm paid $4.3 million for a piece of The Sandbox.

Large sales in a particular area consequently impact the prices of surrounding properties, both in the physical and digital worlds. As a result, speculators can benefit from short-term profits. But speculation can only increase the value of digital property as long as there is scarcity and liquidity.

The key value driver in the Metaverse will be utility, which is currently the “missing layer for most Metaverse platforms,” Sam Huber, CEO of Metaverse development studio LandVault, told Blockworks.

Benefits are directly related to business models that landowners can build on their land, he explained. From selling NFTs as event tickets to e-commerce and advertising, every potential revenue generated adds value to the Metaverse land.

While blockchain-based virtual real estate is relatively new, the concept of digital ownership is not. Be it video games Second Life, Fortnite, Roblox or Minecraft, virtual worlds have already successfully popularized Metaverse assets and resources.

“There will always be speculation, but at some point as more people enter the metaverse, utility will take over and it will make more sense to own land and build a business on it,” Huber said.

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The post “Metaverse Land Prices Hold in Current Market Climate” is not financial advice.