Technology Author:Yunfeng Zhang Apr 18, 2023 12:28 AM (GMT+8)

Just last year in this day and age, the metaverse real estate market was as hot as the tulip mania in the Netherlands in the 17th century. At that time in Amsterdam, the price of a fine tulip rose wildly to several months' wages for workers, just as the sky-high price of virtual land in the metaverse. However, these two orgies across time and space seem to be inevitably headed for a tragic end of plummeting.

Metauniverse

The boom in the metaverse real estate market bears a striking resemblance to the Dutch tulip mania. Over the past two years, with the rise of virtual worlds, metaverse land has become a focal point for investors to compete for. This has led to a spike in virtual land prices, to the point where some lots have surpassed the prices of prime real-world locations.

However, in recent months the metaverse real estate market has seen a sharp drop in prices. This phenomenon reminds people of the tragic end of the tulip mania back then. Many investors are beginning to worry whether the metaverse real estate market will also follow in its footsteps and trigger an unprecedented market collapse.

The so-called metaverse real estate refers to digital land on a virtual reality platform, represented by non-homogenized tokens (NFTs) to indicate its ownership and value. Users can create and experience a variety of service content on this land, ranging from gaming, social and entertainment to advertising, education, healthcare and more.

In 2015, metaverse real estate began to be marketed when Decentraland, an Ethereum blockchain-based virtual reality platform, launched LAND tokens as digital proof of its land ownership. Users could buy LAND with Decentraland's native token MANA and freely build and plan their own spaces and experiences on it.

Subsequently, metaverse real estate has seen wave after wave of price increases, setting many amazing trading records, thanks to the metaverse concept and the hot NFT market.

According to CNBC, metaverse real estate transactions reached $500 million in 2021 and it's projected to exceed $1 billion by 2022; a report by overseas research firm Brand Essence Market Research predicts that the metaverse real estate market size will grow rapidly at a compound annual growth rate of 31% from 2022 to 2028.

Some investors, use digital assets as investments like stocks or bonds; others simply manage metaverse real estate by buying, leasing, etc. Just as everyone is reveling in the joy of getting rich, the market winter has arrived unannounced.

According to data from WeMeta, a metaverse analytics platform, virtual real estate prices began to fall steadily a few months back, with purchases falling off a cliff and previously purchased virtual land now worth barely less than its original selling price.

The median transaction price on Decentraland, currently the world's largest metaverse real estate sales platform, has fallen nearly 90% from $45 in 2022 to $5. Among them, the three pieces of a virtual real estate previously purchased by Lin for $123,000 are now worth only about $10,000, a 91% floating loss.

As of now, this quiet winter also marks a tragic end to the inevitable plunge of the meta-universe real estate market

The sharp drop in the price of virtual currencies such as Bitcoin in 2022 has led to a severe blow to investor confidence in the metaverse real estate market, which has triggered a price drop.

According to cryptocurrency price tracking site Coinmarketcap, mainstream cryptocurrencies suffered massive declines last year; NFT was also severely affected, and Forechain's data shows that NFT's performance weakened in 2022, with significant declines in trading volume, transaction value, and the number of buyers and sellers. In short, falling virtual currency prices are another major reason for the plunge in metaverse real estate prices.

In addition, the loss of users was also a factor in the occurrence of the plunge. Users of the metaverse real estate market are mainly virtual reality gamers and social media users, and if these users are lost or diverted by competition from other markets, it will lead to a drop in demand for the metaverse real estate market and a corresponding drop in prices.

Right now ChatGPT is on fire and metaverse real estate is essentially an attention economy, so if worldwide attention drops, then the price of all those plots will drop.

In addition, the application scenario of the metaverse real estate market is also a reason for the price drop. Compared with the real estate market, the metaverse real estate market has relatively low capacity and use value, and lacks sufficient scarcity and application scenarios.

In summary, the reasons for the plunge of metaverse real estate prices are multiple. The investment decisions and behaviors of investors and developers lacked caution and sanity in the past and did not fully consider the risks and uncertainties of the market. If they had been able to invest more cautiously and sensibly, they might not have faced such huge losses.

ChatGPT is no exception, as it is a matter of time before it becomes hot and cold. Only continuous learning and improvement are essential to maintain competitiveness.