Crypto Market Rallies Are Leaving Web3 and Metaverse Tokens Behind

Even amid turbulent market conditions, the dark days of the cryptocurrency downturn seem to be receding for digital asset traders. The introduction of Bitcoin spot exchange-traded funds in January, combined with public support from Donald Trump, a Republican presidential contender, has enabled a recovery from the fallout triggered by FTX’s downfall.
However, the narrative is starkly different for the metaverse anchored in these digital assets.
Touted as a revolutionary leap in human creativity, this interconnected realm of digital universes is known as web3. Predicated on blockchain technology and digital tokens, web3’s vision was to allow creators to profit from their ingenuity without the meddling of large tech entities. Yet, in practice, pivotal metrics of web3’s worth—such as the value of NFTs and other tokens linked to certain lauded platforms—are predominantly waning.

Andrew Kiguel, CEO of a company in the metaverse sphere previously known as Tokens.com, expressed disillusionment with web3’s profitability. “The dream of this has not been realized,” he remarked, challenging anyone to identify a web3 enterprise that is actually profitable.
In 2021, Tokens.com invested heavily in web3 by purchasing a $2.5 million parcel in Decentraland, a then-prominent metaverse platform accessible via web browsers, where users could partake in varied activities such as gaming or fashion events. Kiguel likened this investment to acquiring land in an expanding urban area, with plans to develop and lease parts of their digital property holdings.

These digital land parcels, akin to other cryptocurrencies, fluctuate in value based on market demand.
Following multiple scandals in 2022, Decentraland suffered significantly, with nearly 90% of its users leaving, per Decentraland Metrics, and property values plunging by approximately 95%, as reported by DappRadar. Mana, the platform’s currency, has drastically fallen to about 30 cents from a peak of over $5 in late 2021. Decentraland representatives have not commented on these developments.
Major corporations attempting to forge their own centralized metaverse versions have also found it challenging. Meta Platforms Inc.’s Reality Labs reported a substantial quarterly loss of nearly $4.5 billion, highlighting the struggles faced by tech giants like Mark Zuckerberg in capitalizing on digital realms.

According to Kiguel, Tokens.com’s digital real estate assets have depreciated by 80%. The company has pivoted away from the metaverse, opting to rebrand as Realbotix and shifting focus to developing AI-driven silicon humanoid robots following its acquisition of Simulacra, a manufacturer of lifelike sex dolls.
A firm that provided loans for metaverse properties also suffered from the downturn. TerraZero Technologies Inc., at the start of 2022, had granted what it claimed to be one of the inaugural metaverse property mortgages, aiming to facilitate easier access to digital real estate. However, subsequent loan applications, driven by speculative motives without intentions to develop the properties, were all denied, stated CEO Dan Reitzik.

And when property values plummeted, the sole mortgage issued was returned at the original price.
According to Reitzik, the complexity of cryptocurrencies and NFTs remains a barrier for the average consumer and commercial brands alike.

He suggested that a metaverse operating with traditional fiat money might have broader appeal to the general populace and businesses.

James Casey, an associate professor of computer game design at George Mason University, echoed this view. Before his academic career, Casey had over a decade of experience in video game development, particularly in creating expansive multiplayer online games—a precursor to modern metaverse platforms. These games often featured personalized avatars, vast virtual landscapes, and in-game economies where real money facilitated the trading of virtual goods.
“Blockchain is an impressive technology, but gaming companies prefer to control their databases,” he noted. “In a virtual environment where anything is possible, there’s still a desire to possess, to own parts of the virtual world, viewing it as just another arena for possession.”

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