Crypto expert Dominic Basulto is investigating whether the 2 metaverse coin projects, which dropped more than 90% in 2022, can bounce back in 2023. The expert also analyzes DeFi’s important name, Phantom.
Two high-profile metaverse coins disappointing
Both Decentraland and Sandbox are faced with a series of questions about their metaverse strategy leading to 2023. This is supposed to be the year of the metaverse, right? Remember the ‘not to be missed’ $1 trillion market opportunity that brands, celebrities and tech companies embraced in 2021 hoping to make a big profit in 2022? Instead, Sandbox (SAND) and Decentraland (MANA), the two highest-profile metaverse coins, have dropped more than 90% over the year. Thus, many investors became uncomfortable with the concept of the metaverse.
If these two metaverse coins hope to make a comeback next year, they need to do something different to entice more people to spend time in virtual worlds. Until we do, the cryptos powering these virtual worlds are unlikely to recover any time soon.
Metaverse or Multiverse?
A good starting point is to simply figure out what the metaverse should be. The original concept of Metaverse is a shared virtual world where people hang out, shop, learn, work and spend time together. Since this was supposed to be a $1 trillion market opportunity, being a dominant player in the metaverse meant enormous, untapped riches. This is why hopes were initially so high for both Decentraland and Sandbox two years ago. Because these seemed like the obvious winners.
However, the reality turned out to be much different. Instead, a more accurate definition of metaverse would be ‘multiverse’. This is a parallel universe of competing metaverse properties, where any crypto can create its own metaverse world. Take, for example, ApeCoin (APE), which now powers the Bored Ape Yacht Club’s Otherside metaverse world. Even the meme coin Shiba Inu is getting in on the action with its own virtual world called SHIB: The Metaverse. As a result, it is getting harder and harder to acquire metaverse coin investors for Decentraland or Sandbox.
Also, almost any video game platform can claim to be part of the metaverse, blurring the line between the game and the metaverse. It’s easy to see if you look at MTV’s ‘Best Metaverse Performance’ category, which debuted a few months ago. The nominations are a confusing mix of different video game platforms and tech companies. Also, neither Decentraland nor Sandbox were part of that mix. For two cryptos to rise in 2023, they need to show users that they offer a unique value proposition. At the very least, that means they show that spending hours in their own metaverse is a better use of time than binge-watching the latest Netflix show.
Use case of Metaverse coin tokens
Decentraland’s token MANA and Sandbox’s token SAND are the official currencies of these metaverse worlds. For example, if you want to buy virtual land in Decentraland, you must pay for it in MANA, not in US dollars. You can also use these currencies to pay for things like wearables for your avatars. However, these tokens have almost no value outside of their respective metaverse worlds. You cannot pay your monthly mortgage with the metaverse tokens you use to pay for virtual land. Even NFT digital assets created in these worlds have very limited value outside of the metaverse.
From my perspective, these tokens would be much more valuable if they had more real-world utility. This is a strategy that ApeCoin has successfully implemented. There is now a growing ecosystem of Bored Ape products and services where ApeCoin can be used for payment. There are also new investment opportunities for ApeCoin holders, including staking NFTs for passive income.
Should I buy Metaverse coin projects?
At the end of the day, it’s possible that the metaverse will one day fulfill its $1 trillion promise. However, this is not in 2023. This becomes clear if you look at the usage figures. Decentraland claimed to have 50,000 daily visitors in its heyday in early 2022. Plus, the potential seemed limitless. Decentraland says usage has now dropped by 80%. This metaverse world has only 10,000 ‘core’ users. For all the hype this metaverse world is getting, you can expect that figure to be 10x or even 100x higher.
So, for now, I doubt any of these two metaverse coin projects will bounce back in 2023. Metaverse’s novelty effect has decreased. Also, we now need to see numbers and measurements to support them all.
Phantom underlines fundamental financial strength
Given that Phantom is easily one of the worst-performing cryptocurrencies on the market this year, investors might assume it’s in a pretty dire financial situation. However, Fantom has made it very clear that it is unaffected by the failed crypto exchange FTX (FTT) and has the financial resources to await the crypto winter. As you follow on Kriptokoin.com, at the end of November, Fantom released a detailed explanation of its financial records showing that it has 340 million dollars worth of digital assets in its possession.
On top of that, Phantom also announced that this is a 30-year runway to run out of money. This calculation was based on an annual burn rate of $7 million and the ability to generate stable annual revenues from these $340 million worth of digital assets. Phantom says cash flow is positive right now. It earns $10 million a year primarily through the use of different decentralized finance (DeFi) protocols.
DeFi will unlock Phantom’s long-term value
This brings us to the main reason Phantom was set up for a potential rebound in 2023. It seems to be focusing on DeFi as a long-term way to unlock the value of Phantom Blockchain. DeFi is one of the most important market sectors in the blockchain and crypto world. It’s also an area where Phantom is already showing significant strength. As Andre Cronje recently pointed out, Phantom would not exist without DeFi.
This doubling down on DeFi will reassure investors, as the phantom isn’t trying to become something it’s not. For example, if Phantom suddenly announced it’s entering NFTs or Web3 games or the metaverse, that would show a lot of red flags. But Phantom is taking back a famous DeFi pioneer. Also this is ready to unlock DeFi for Phantom. Focusing on what you do best makes a lot of sense from a long-term business perspective.
Questions and concerns about the Phantom
But the real question is what this DeFi embrace will look like for Phantom. I don’t think Phantom will try to be everything to all people. Unlike other Blockchains that try to offer everything Ethereum does, Phantom will focus primarily on DeFi. In short, he will no longer try to be an ‘Ethereum killer’. Instead, I think Fantom will evolve over time to focus more on smart contracts, digital assets, and really smart ways to get yields from those digital assets. Fantom may start to look like Yearn.Finance (YFI) or SushiSwap (SUSHI), two of the DeFi crypto projects Andre Cronje worked on before Fantom.
While the future suddenly looks promising again, it’s still hard to trust Phantom after a grim 2022. It looks like investors left Phantom after a short, spectacular run when it rose from $0.02 in January 2021 to about $3.50 in January 2022. I’m definitely putting Phantom on my watchlist for 2023. But I can’t recommend this crypto until I see solid, tangible evidence that it’s really just around the corner.
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