There have been some interesting updates in technology since the start of the Covid pandemic, especially when it comes to virtual meeting spaces. Earlier this year, Facebook announced a rebrand to “Meta,” stating that “Facebook is more than just a social network,” and announced plans to create a digital space for interpersonal communication in real time called the Metaverse — essentially, an entire digital world created by the people that use it. Already, speculative investors are creating a market for virtual real estate at a time when most people still are not using metaverse platforms.
But, is this really a practice that could stick? As the general public continues debating the merits of cryptocurrencies like Bitcoin and Ethereum, other investors are going all-in on digitized currency and property.
Metaverse Group Invests in Decentraland
Metaverse Group, a “vertically integrated real estate company from the metaverse economy,” (and not to be confused at all with Meta) recently purchased almost $2.5 million worth of real estate in the digital world of Decentraland. This reflects the largest transaction for virtual real estate currently on record, in a world that isn’t complete and can never physically be visited. Not to mention, the transaction was paid for in a cryptocurrency known as Mana, which is currently valued at under $4 per coin in the Decentraland marketplace. By some accounts, this simply isn’t a real transaction — so why would Metaverse Group go through with it?
According to an interview with the New York Times, Metaverse Group co-founder Michael Gord likened it to if one “came to New York when it was farmland, and you had the option to get a block of SoHo.” Clearly, there is a lot of speculation here that the future is digital — that humans will be plugged into a virtual reality and will buy, sell, and trade commodities within those virtual worlds just like they do in the physical world around us.
What Does Virtual Real Estate Mean for the Future of Investing?
At this time, you’d be hard pressed to find any financial institutions willing to lend against digital assets. Cryptocurrency is still largely unregulated, and traditional investors don’t believe that it’s a viable financial product for the future. Young investors, however, are drawn in by the promise of self-regulating blockchain technology, artificial intelligence, and getting in on the ground floor of what could potentially end up being an investment everyone wishes they had made.
With that in mind, younger investors seem more inclined to tolerate the risk that comes with pioneering new markets, and though it may seem distant at the moment, it’s possible that younger generations will succeed in legitimizing these types of markets.
That remains to be seen, however. For the time being, anyone is free to place their money into the instruments that they believe will be best for their own personal financial success. Maybe there will be something to this in the future, but for now, this market can be written off as purely speculative. Even if some investors manage to turn profits within that market, it’s not likely to affect physical real estate in any way, nor can we expect at this time that it will become a viable market.
Focus on “Real” Estate
While it can be exciting to explore speculative markets, it’s also incredibly risky. So, unless you’re willing to gamble, it’s going to be wiser to stick to the established markets that you’re used to. There’s nothing wrong with venturing out and trying anything new — but with uncertainty around what (if any) returns can be seen from these investments, it’s probably best to let others do the exploring for the time being.
While Pimlico Capital can’t help you purchase or rehab a virtual property, we can most definitely accommodate any real estate funding needs you have in the real world! Get in touch today to learn more about how investors have grown their businesses with us.