The Metaverse.

Source: Bloomberg Intelligence.

The opportunity of the Metaverse.

Which companies could lead the industry?

Source: Global X ETFs, Stream Charts, Billboard.
Source: Global ETFs, Fandom, The United Nations World Tourism Organization (UNWTO). Note: Roblox Adopt ME! annualized visits since release in July 2017 through August 2021.
  • Casino’s & Games.
  • Advertising.
  • Concerts/Events.
  • Business Offices.
  • Museum/Art Galleries.
The Metaverse addressable market by sub-themes. Source: https://markets.businessinsider.com. Each of the companies above are addressing their own specialized product/service that might in the future contribute to the Metaverse infrastructure.
  • Gaming — $7.5B.
  • Online Gaming — $2.5B.
  • Augmented Reality (AR) — $2.1B.
  • Virtual World — $62.8M.

Related Investments

  1. Equities — We’ve already discussed a few that are working directly in the development of this technology. Like the FAAMG giants, Roblox, Unity software and NVIDIA are a few examples of equities that may benefit from the Metaverse development.
  2. Cryptocurrency Projects — There are some projects in the crypto universe that are also becoming part of this tech disruption. However, it’s worth noting that those projects are highly speculative and demand a high risk/reward tolerance. Decentraland, The Sandbox, Enjin Coin and WAX are just a few examples. SkillGaming has also crafted plans for its own Metaverse, focusing on a unique hyper economy, game-fi and NFTs.
  3. ETFs — Another indirect play is the first Metaverse ETF that was launched in June this year. The Roundhill Ball Metaverse ETF (META) tracks the performance of globally-listed companies that are related to the Metaverse. They brought a great opportunity to invest in the Metaverse theme for those with a lower risk tolerance. Some of its top holdings are Nvidia Corporation, Roblox and Microsoft.
  4. Grayscale Investments — Grayscale is a company that manages digital currency investment funds. Headquartered in New York City, the company operates under a proper regulatory framework and offers a secure and compliant way for investors to get exposure to products related to the digital currency asset class. Their current AUM is around $60B.
  5. Metaverse Index — Metaverse index is a decentralized and autonomous asset manager created in 2020 on the Ethereum blockchain. It’s like a traditional ETF. They offer a basket of crypto products that captures the Metaverse thematic and with their $MVI token the investor is able to diversify their portfolio in a less volatile manner. Since its launch in April, the Metaverse Index has gained approximately 175% in valuation. However, it’s worth noting that it has also seen a drop of 70% when the price reached its bottom in June, 2021.
Metaverse Index. Source: https://www.indexcoop.com/mvi

Risks

  • Data: Digital data is already important today and will be even more important in a digital world. Social media companies have come under fire by regulators for abusing data privacy laws. In the Metaverse it’s still unclear if the user will have full rights to their data, avatar and virtual assets or if the companies will have full ownership of those, therefore giving them power over the users. We have seen the recent power of social media in shaping our consumer needs and even political decisions. This is something that will need to be addressed if we want to have a fair more friendly user environment.
  • Health: We do not have long-term studies on how much our physical and mental health might be impacted by spending too much time in an immersive reality. Today there are still many people that complain about dizziness and discomfort when using VR headsets for a long period of time. Recent studies point towards social media as being the culprit for the increase of anxiety and depression among younger generations and this issue might be amplified by the uncontrollable use of this new technology.
  • Security: Unique avatars, assets, transactions, and much more will be possible inside the Metaverse and for this reason there will be malicious users that will try to take advantage of this environment for cyber attacks. It could be very damaging for someone in case a malicious hacker steals his/her unique avatar and starts to perform actions without your authorization. Virtual assets will also be extremely valuable, which will make them a target for bad actors in the space. A very robust security will need to be in place for these virtual worlds.

Hatchworks Takeaway

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Oto Suvari

Oto Suvari

Heading up the group’s R&D activities for Hatchworks.