Chris’ note: If you’re like me, your head starts to spin when you read about the metaverse – an evolution of the internet that you can step inside. So this week, we’re diving into this monster trend to help you better understand it.
I urge you not to tune this out. The metaverse combines many of the tech megatrends we track for you here at Legacy Research – 5G, blockchains, NFTs, virtual reality, augmented reality, and artificial intelligence. Colleague Teeka Tiwari says it’s the most exciting profit trend since he discovered crypto. And as you’ll see below, you can start investing in it now.
That’s why, today, you’ll hear from Teeka’s chief analyst at The Palm Beach Letter, Nilus Mattive. One of the aspects of the metaverse he’s most interested in is the virtual economy taking shape there. There are even jobs you can do to earn crypto by way of a digital avatar…
Chris Lowe: Hi, Nilus. For folks just hearing about this, how would you explain the metaverse?
Nilus: It’s where many different trends and technologies are starting to intersect.
Take the power of the internet… plus 5G smartphones and tablets… and add in artificial intelligence (AI), virtual reality (VR), and augmented reality (AR). AR is where you blend what you see in the real world with computer-generated images and sounds.
Now, start layering in all the possibilities of the blockchain – cryptocurrencies, NFTs (non-fungible tokens), decentralized organizations – and you get this new evolution of the internet that’s much richer and more immersive than the version we have today.
Chris: I’ve described the metaverse as a version of the internet you step inside. If readers have kids who play the computer game Fortnite or Roblox, you’ll have a sense of it. Instead of just calling up web pages and watching videos… you’ll enter a virtual world where you can interact with other people’s avatars – digital representations of themselves – and even be part of a whole new economy.
Nilus: That’s the thing… This is a really big idea that’s hard to wrap your head around. And we’re still in the very early stages. But so was the internet in the 1990s and early 2000s.
I’m sure you remember conversations you had 20 years ago when you were trying to explain the internet to a friend or family member. “Well, there are these things called web pages. And you use these things called hyperlinks to move between them.”
It was hard to fully understand because it was all so new. And nobody predicted the kind of internet we have today, with social media, video streaming, and virtual worlds.
Chris: You recently wrote an issue of The Palm Beach Letter about the metaverse and how your readers can profit. (Paid-up Palm Beach Letter subscribers can access that in full here.) You talked about the virtual economy you see taking shape inside the metaverse. Tell me more about that.
Nilus: You used the game Fortnite as an example of what the metaverse is like. But it’s important for your readers to understand it’s not about just gaming. The metaverse is a varied landscape with up-and-coming art galleries, first-rate concerts, and luxury shopping.
There are even people who get paid to work in a casino in a blockchain-based virtual world called Decentraland by way of their avatars. And they’re earning in a cryptocurrency they can cash out into dollars.
There’s also a metaverse “play to earn” game called Axie Infinity that’s based around NFTs. Players can earn cryptocurrency in the game and then cash it out for local currency.
It’s been a huge hit… especially in places where the local jobs markets don’t offer much. There are people in the Philippines, for instance, who are earning more money playing Axie Infinity than they would earn in a real-world job.
Big brands are also getting involved. Folks are buying $4,000 digital Gucci bags in Roblox. Vans set up its own store there, too. And Sotheby’s (BID) has been holding metaverse art auctions. I have my own avatar to attend and bid on various NFT art.
Enthusiasts talk about a day when there will be full-time digital real estate agents and AI-driven clerks running virtual stores.
Chris: The digital real estate phenomenon is wild. Explain how that works.
Nilus: I’ll give you one example. Players can develop “land” in the Axie Infinity virtual world. It’s in the form of an NFT – a digital token representing a unique plot of land in the game. Players use this land to produce in-game resources and create stores. Landowners can even develop their own games and attractions and charge other people to visit them.
Land in Axie Infinity is going for big bucks. It creates a lot of new profit potential in the process. A private investor recently bought nine plots of land there for $1.5 million.
Just like real estate in the real world, some locations inside these virtual worlds are more valuable than others. But even the cheapest plot of land sells for more than $10,000 today.
Chris: It sounds to me like some form of the metaverse is already here.
Nilus: I think that’s right. It’s the early days still. But this isn’t some far-off prediction. You and I may not work in a digital casino… or earn crypto playing a metaverse game. But other people do.
Teeka and I see the metaverse eventually becoming one of the largest economies in the world. It will transcend geography in a way most real-world economies don’t.
It’ll be a great equalizer in terms of spreading financial opportunities to people in places where those opportunities aren’t possible otherwise.
Chris: It’s a fascinating idea. But my sense is a lot of folks reading this are skeptical about this idea becoming a reality. What do you say to people who think this is maybe something for kids with VR headsets… but it’s not going to be a serious next step for how we interact online?
Nilus: People talk about this being a young person’s trend. But that’s missing the point. Let me illustrate what I mean with a personal experience.
My daughter is 14. She plays Roblox. As you mentioned, it’s a game that comes very close to the metaverse concept.
My mother-in-law is in her 70s. And she has started to embrace Roblox as a way of playing and interacting with her granddaughter.
She’s in Delaware. We’re across the country in California. But I’ll hear my daughter laughing and saying, “No, Grandma, don’t go that way! Go this way. No, we’ve got to go here! See that thing? Jump up on that.”
It’s very much like they’re physically together in the same place. It’s not like my daughter is watching a screen and her grandmother is watching another screen. They’re inside this three-dimensional space with each other by way of their avatars. If you didn’t know what they were doing, you would be pretty sure they were in the same room playing a physical game.
I can imagine a world where the metaverse is even more advantageous to people who don’t live in places where there are tons of opportunities to do cool things. Or to people who have physical challenges in the real world.
Think of older folks in nursing homes. Imagine being able to just strap on your virtual reality stuff and hang out with your grandkids and play with them in a world where you’re all on equal footing. I think a lot of adults are going to find many things they like in the metaverse, too.
Chris: You’ve put together an extensive report for readers with some specific recommendations. They include a crypto project connecting the real world to the metaverse. But for folks who are just getting started, is the Roundhill Ball Metaverse ETF (META) a good starting point?
Nilus: META is a broad-based fund that gives you exposure to different companies set to profit as we move toward some version of the metaverse.
It includes stocks in companies that provide the computing power to support the metaverse. That’s why chipmaker Nvidia (NVDA) is a top holding. Its GPUs (graphics processing units) power the gaming engines needed to build these virtual worlds.
META also includes companies that are building metaverse worlds directly, such as Roblox (RBLX). And it holds leading companies behind some VR and AR hardware. So you also have Facebook (FB) and Snap (SNAP) in there.
If you want exposure to just this general trend through the biggest companies working on this kind of project, then I would say META is absolutely a good addition to your portfolio.
But it just scratches the surface. At The Palm Beach Letter, we believe there will be 1,000x gains on offer – whether that’s in stocks behind companies building out the metaverse or in the crypto assets associated with these projects.
Chris: Thanks, Nilus.
Nilus: You’re welcome, Chris. Anytime.