If you are still asking which cryptocurrency you should “invest” in, you are heading in the wrong direction. As I have discussed in my earlier article, the value of what crypto brings to this world is not just a few more symbols to trade or a get rich quick scheme. It is a much bigger revolution. The metaverse could just be the inevitable future of the digital world.

Related readings: What is the future of Bitcoin?

I think the Metaverse is a much more powerful concept than cryptocurrencies because it is creating a parallel new world instead of trying to destroy the existing system, which the crypto enthusiasts are advocating. The metaverse will be right at the new frontier of human evolution, because it puts many innovations together such as blockchain technologies, cryptocurrencies, non-fungible tokens (NFTs), etc.

It is ok if you are still feeling raw and confused about these concepts, but if you don’t want to miss the revolutionary opportunities that will arise, you should start digging more into this topic.

I must admit that I too am still learning as the topic is huge. But in this article, I will try to explain this topic in the simplest form: What is the metaverse? Why you don’t want to miss it? and What are the investment opportunities surrounding this theme?

What is the Metaverse?

The metaverse is a combination of two words: “meta” and “verse”. Meta means “beyond”, Verse means universe.

The word “Metaverse” was first coined by author Neal Stephenson in his 1992 science fiction novel “Snow Crash”. In the book, the Metaverse is a collective virtual shared space, created by the convergence of virtually enhanced physical reality and physically persistent virtual space.

If it is hard to imagine, take a look at the trailer of the 2018 movie “Ready Player One”, then you will have some ideas.

In today’s context, the Metaverse is a digital reality that combines aspects of social media, online gaming, augmented reality (AR), virtual reality (VR), and cryptocurrencies to allow users to interact virtually. It is a “universe” where people interact with each other not in real person, but virtually.

Today, I think to many people, the metaverse may still sound like science fiction, but human advancement always starts with dreams. The 1980s “Back to the Future” series was one of my favourite movies. and most of the things that appeared in the movie have become reality today.

Why the Metaverse will be a secular trend

It is not a coincidence that the concept of a “Metaverse” has become increasingly popular today. However, it is important to understand that for the Metaverse to work, all the stars must be aligned. Here are the three prerequisites:

#1. Wide adoption of virtual interaction.

Virtual interaction used to be just after school chat for young gamers.

When I was a teenager, I was a big fan of an online strategic game called Starcraft. We would chat and play with other players online without even knowing their names or genders. Then came “Counterstrike”, where you could shoot enemies on a battlefield from a first-person point of view.

Screenshot of Counterstrike gameplay

20 years ago, technology was already very good. If you have ever watched someone playing such games, you will see that the gamers are moving their head and bodies to dodge the bullets and attacks as if it is real, even without a 3D headset.

For non-gamers, virtual reality was largely the virtual roller coaster ride and flying simulation in the science centre.

But the world has changed upside down due to the global pandemic and everybody was forced to “work virtually”. And that is a big thing.

You can have no interest in gaming, but almost everybody needs to work. Interacting virtually is not a matter of choice but a must. Just like people say “google it” instead of “search for it”, “Let’s zoom” is a new way of saying “let’s meet”. Even the world leaders had to meet virtually at the latest global climate summit.

Research shows that it takes on average 66 days to form a new habit and perform it automatically. But we have been in this for two years! So it is only reasonable to assume that this way of human interaction will continue even after all these lockdowns are over and we move to an endemic world.

#2. The rise of virtual currency.

As I discussed in my earlier article in early 2021, cryptocurrency itself has no long term investment value because you can’t eat and drink it. Most countries will not legitimize cryptocurrency if it was used to destroy or replace the existing financial system.

If you treat cryptocurrency as speculation or gambling, it is your choice. If you are into #defi and being a villain to fight against the “corrupted financial system”, I salute you, But the sheer number of people who lost money in crypto scams shows how few people actually understand how this works.

If you think about it, the mass adoption of cryptocurrency will not increase but will kill its “investment value”. Do you invest in the US dollar, the most widely adopted currency in the world? Do you invest in RMB, Euro or Russian ruble? A currency has no fundamental investment value because it is measured against another currency.

What crypto really brought to the world is not an easy way for the poor to become millionaires, but mass adoption of the new blockchain technology. It helps people realize that a currency doesn’t have to be a paper note.

Even China has totally banned crypto trading and mining, they are moving full force into a digital currency world.

Whether you live in a real-world or a virtual world, some type of currency will be essential to carry on human activities. It will just be in different forms.

This is such a basic concept that even my kids understand when they play games such as “Clash of Clans” or “Hay Day”.

The rise of cryptocurrency has just started, even if it may not be the way you think or hope for. The mass adoption and acceptance of crypto, be it Bitcoin, Ether or Dogecoin, is the foundation to make the Metaverse happen.

#3. The implementation of the virtual certificate

If you pay attention to the digital space, you will inevitably notice the exploded popularity of non-fungible tokens (NFT) recently. Why?

If you buy a house in the virtual world and someone stole it, will you call the police? How do you justify that this house was yours?

NFT is another huge topic, but in a nutshell, it is a way to certify the ownership of an asset in the digital world. Non-fungible means it is unique and irreplaceable. If you own a cryptocurrency, say Bitcoin, your Bitcoin has no difference from another person’s Bitcoin. But if you own an NFT, you are the owner of the underlying “asset”.

In the simplest terms, NFTs transform digital works of art and other collectables into one-of-a-kind, verifiable assets that are easy to trade on the blockchain.

If it is still hard for you to understand, you can think about an NFT as the title deed of your house. How do people know that you own the house that you are living in? There is this “certificate” stored in the government database. And when you sell your house to another person, you transfer this “certificate” to another person. That is exactly what an NFT does in the digital world.

Earlier this month, the Straits Times reported that a team of Singapore enthusiasts made nearly $1.4 million in cryptocurrency in just over an hour after it launched a series of digital trading cards tied to non-fungible tokens (NFT) online.

But this is just small change, the NFT market is already a multi-billion dollar industry. CryptoPunk #9998 were sold for 124,457 Ethereum (about $532 million in October). What is CryptoPunk? All of the icons below are. Can you guess which one is #9988 that was sold for more than $500 million?

At this moment, the NFT market is just like the earlier stage of Bitcoin, people are coming in to speculate and hoping to make a windfall. But the adoption of the NFT concept will eventually provide a foundation in the financial system in the Metaverse.

Let’s talk about investment opportunities

Please note: The stocks mentioned below are for education and discussion purposes, it is not financial advice.

Before you get excited about all these futurist opportunities, let’s take a step back.

You need to ask yourself, “Am I investing for a short term big return by speculating, or do I want to earn long term returns by riding this trend”?

When people trade cryptocurrencies or NFTs, they are mostly just hoping someone will pay a higher, if not much higher, price than what they have paid. It is called the “greater fool” theory.

But if you open your mind and think about the bigger picture, there are many opportunities with greater predictability.

On Oct 28, Facebook changed its company name to Meta. That is a huge move. Obviously, they are not betting whether Bitcoin will trade at US$50K or US$100K, they must have seen something much bigger.

From an investor’s point of view, I think there are 3 areas we can start with.

#1. Virtual meeting and social networks

While Facebook (Meta) is trying to “steal” the name of “Meta” by associating the company with the Metaverse, other tech giants are catching up.

At this moment, there is no clear definition of what the metaverse is about. If we think a Metaverse is a digital space of “bringing people together”, Microsoft Teams or Zoom is already a form of a Metaverse. On the contrary, Facebook has just started.

But the interesting thing is that Facebook acquired the virtual reality headset company Oculus for $2.3 billion in 2014. So obviously they have planned this for a long time.

#2. Virtual reality experiences

In fact, almost every visual and audio set-up can be redesigned for the Metaverse. And if you wear 3D glasses with stereo sound and a touch device, the Metaverse is fully immersive.

While Facebook and Microsoft are currently a step ahead, I am sure Disney, Netflix and Amazon will join the game soon. Many years ago, Alphabet (Google) attempted Google glasses, but it was not very successful. Let’s see what comes next.

Gaming companies and platforms of course have the best talent and technologies to provide a virtual reality experience. Unity Software, Roblox and even Tencent are at the forefront of this game (but bear in mind the risk of investing in China tech).

Related reading: Should I buy China tech stocks after the crackdown?

Talking about games, I recently wanted to introduce Roblox to my girls who are in their 10+. Guess what? They already knew! So don’t underestimate the speed of adoptions of these techs.

But the real big shot in this field is Epic Games which is still a private company. The company owns Fortnite, one of the world’s most popular games, with over 400 million players.

If you understand, Fortnite is already a Metaverse game and it is beyond a game. In August, the world-famous singer Ariana Grande, who has 50.2M Youtube subscribers, performed in Fortnite Presents Rift Tour.

Can’t imagine what it looks like? Watch this video below.

#3. Infrastructure providers

To make all these virtual realities happen, we can’t forget the physical set-up. That is why the profitability of graphics and video processing chips providers such as Nvidia and 3D design application Autodesk can’t be ignored.

Cloud computing and stable networks are also backbones for user experiences.

Virtual Reality (VR) headsets and Augmented Reality (AR) will become a norm in the future. I mentioned that Facebook has acquired Oculus and I think that this sector will have a tough fight. As VR headsets become a commodity, the profitability is questionable because it is the virtual part that will make real money. But we still need to watch out for any breakthrough technology along the way.

Oculus virtual reality headset

By the way, you can research, monitor and trade these stocks using moomoo platform.

 

A word of caution

Just like all Wall Street stories, the metaverse is exciting and sounds like a sure win. But as an investor, we need to keep a cool head.

Today, many people are talking about Tesla’s success and its skyrocketing share price at $1,100+. But if you were an investor in Tesla in the earlier years, it was an extremely painful path. The stock price of Tesla was hovering around $4 to $7 from 2010 to 2013 for 3 years. After a rally, it hovered around $30 to $50 from 2014 to 2019 for 5 years. And Elon Musk admitted that the carmaker was “about a month” from bankruptcy during the run-up in Model 3 production from mid-2017 to mid-2019.

I wonder how many people actually had the courage and faith to really sit through this? There are many self-claimed Teslanaires (Tesla millionaires), but where were they in 2010? Is it luck or skill?

As a person who started programming at age 10, the Matrix was a revolutionary movie to me. That was pretty much my first “Metaverse” exposure. The movie described a dystopian future in which humanity is unknowingly trapped inside a simulated reality, the Matrix, which intelligent machines have created to distract humans while using their bodies as an energy source. (I am excited that the Matrix 4 is coming. yay!)

If you haven’t watched the movie before, you need to spend just one minute to watch this epic scene in the movie while Neo (the main character) dodge bullets in the virtual world.

But the movie tells us is that it can take more than 20 years for an idea (i.e., virtual reality) to reap rewards. The metaverse will continue to be hyped up in the months to come, but it doesn’t necessarily mean that you can make an investment profit immediately.

Furthermore, there will be winners and losers in this race. Companies that seemingly dominate in the space may be overtaken by new players in the blink of an eye. Think about Nokia.

Additional Reading: Why long term investment doesn’t make sense.

There is a difference between being a pioneer in a revolution and being a profitable investor. Talking about the newest ideas may look cool, but it doesn’t mean you can make money.

I want to remind you that the price of the stock market, especially technology stocks and innovation stocks, are overly extended. Short term wise, the stock prices can be easily rocked, especially if interest rates start rising. So you should exercise extreme caution.

Additional Reading: How do rising interest rates affect the stock markets.

That is why I am a firm believer in investing by identifying secular trends, but without becoming overly attached to them. And that is how I developed the GMC investment strategy.

It is my belief that we are at the very early stage of a human revolution caused by a prolonged loose monetary policy, triggered by a pandemic and completed by disruptive technologies. If you are investing for a long term goal such as retirement, you should pay attention to this.

I am having a Chinese Facebook Live about Metaverse on December 22. Click below to join the discussion.

If you like this article, share it and join my Telegram channel for more investment discussion and ideas.

If you want to find out more about my investment management services, use the form below to submit a non-obligatory zoom meeting request. After all, we are heading towards the Metaverse!

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
The views and opinions expressed in this article are those of the author. This does not reflect the official position of any agency, organization, employer or company. Refer to full disclaimers here.

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