- Decentraland is generating excitement among investors, but its virtual reality platform is still very young.
Everyone is talking about the metaverse lately. The promise of people socializing and conducting business in interactive virtual worlds has investors and major corporations alike scrambling to get a ground-floor position in this potential “next big thing” trend. Roblox (NYSE:RBLX) stands as one of the biggest players in the space and has climbed to a market capitalization of roughly $76.5 billion thanks to strong engagement, but it’s not the only fast-growing metaverse platform.
Decentraland (CRYPTO:MANA) is a metaverse that’s built on top of the Ethereum blockchain, and its MANA cryptocurrency token has seen stellar gains this year amid surging interest in both digital currencies and interactive virtual platforms. MANA is up roughly 6,000% across 2021’s trading, and some investors are betting that its run is just getting started.
Image source: Getty Images.
Understanding Decentraland and the MANA token
The Decentraland metaverse allows users to purchase virtual tracts of land in its world and design and outfit them as they see fit. A user could buy space in Decentraland in order to show off the non-fungible tokens (NFTs) that they own, potentially with the hope of attracting an audience and selling them for hefty prices. A clothing brand could buy land and use it to advertise and sell its latest fashions or function as a social meeting hub for its brand devotees.
A plot of land in Decentraland’s virtual metaverse recently sold for $2.43 million, and the team of investors who bought the tract of digital land plans to eventually host fashion shows and sell goods in the space. The MANA token is the currency that users transact with inside of Decentraland, and the explosion of interest in metaverses could help spur more explosive growth for it.
Put MANA’s incredible gains and outlook in context
Decentraland has attracted attention and seen the valuation for the MANA token explode largely thanks to speculation. After stellar gains this year, the cryptocurrency has a market capitalization of roughly $8.7 billion and ranks as the 23rd-largest cryptocurrency by market cap.
Of course, people aren’t just buying MANA in order to carry out transactions in Decentraland. As it stands right now, most people buying and selling the cryptocurrency are probably doing so with the intention of making a profit on a trade rather than transacting within Decentraland.
If Decentraland managed to grow to the size of Roblox, that would imply roughly 780% upside for the MANA token. Based on previous incredible bull runs that have helped power the cryptocurrency market and the potential for individual tokens to post huge gains on very little news, it’s within the realm of possibility that Decentraland’s valuation could pass Roblox’s current level. However, the blockchain-based metaverse would likely need to continue adding users at a rapid clip and record consistently strong engagement trends or benefit from more runaway valuation speculation.
Roblox ended its last quarter with 47.3 million daily active users. Meanwhile, the Decentraland active user base numbers in the low thousands and looks paltry by comparison.The valuation for the MANA token isn’t closely tied to user engagement or transactions within the Decentraland metaverse yet, but investors should keep in mind that the blockchain-based virtual platform is still at a very early growth stage compared to some existing players in the broader space.
MANA is very high risk, but the metaverse is just heating up
Decentraland’s cryptocurrency appears to be generating interest for the platform, and it’s possible that its first-mover position in blockchain-based metaverses will be a foundation that leads to much bigger things. For risk-tolerant investors looking for exposure to the intersection of cryptocurrencies, NFTs, and the metaverse, the MANA token could make for a natural portfolio addition.
Looking at the valuation and engagement levels that Roblox has achieved, it’s possible that Decentraland and the MANA token still have an explosive runway for expansion. However, investors should proceed with the understanding that the cryptocurrency token’s valuation has mostly been driven higher by speculation, and pricing could fluctuate dramatically based on the platform’s progress and trends shaping the broader cryptocurrency market.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Ethereum and Roblox Corporation. The Motley Fool has a disclosure policy.