Is Investing in Digital NFT Lands a Wise Choice for Retail Investors?

March 3, 2023

By Murtuza Merchant

The world of cryptocurrency and blockchain technology has given rise to a new asset class in the form of non-fungible tokens (NFTs), which are unique digital assets that represent ownership of a variety of items such as artwork, music, videos, and even virtual land.

Virtual real estate asset NFTs, in particular, have been gaining popularity since the rise of metaverse-themed projects that allow users to create and explore virtual worlds.

However, with the recent plunge in digital NFT land prices, the question arises – is investing in digital NFT lands a wise choice for retail investors?

Understanding Digital NFT Lands and Their Appeal

At the height of the crypto boom in mid-2021, tokens of leading blockchain-based projects like Decentraland (MANA), Axie Infinity (AXS), and The Sandbox (SAND) saw their price sky-rocket, fueled by increasing demand for virtual land in such metaverse-themed projects.

These projects drew hordes of investors who ended up paying thousands of dollars for plots of virtual land in lieu of non-fungible tokens (NFTs) representing these digital spaces.

The appeal of digital NFT lands lies in the potential of metaverse-themed projects to be the next iteration of social media.

Artists such as DJ Marshmello, Paris Hilton, and Justin Bieber, amongst others, further added to the euphoria surrounding the metaverse, with their avatars performing at events hosted in this virtual world.

The concept of owning virtual land in these metaverse-themed projects is similar to owning real estate in the physical world, with the added advantage of being able to create and customize virtual environments.

The Rise and Fall of Digital NFT Land Prices

While digital assets like virtual private islands and even mere plots of land witnessed multi-fold price appreciation during late 2021 and early 2022, virtual land prices and sales have been on a downward trajectory ever since.

According to the Virtual Land Dashboard prepared by Dune Analytics, the average sale price of all virtual land sold on Decentraland in December 2022 was $1,878, representing a nearly 60% drop from the corresponding figure of $4,683 in the month of February 2022.

Other platforms like Sandbox and NFT Worlds have seen an even greater drop, with the average sale price falling by ~70% and ~93% respectively in the same period.

What’s more, the total value of land sold per month has fallen even more drastically, with Decentraland recording just $568,279 in sales in December 2022.

Compare this with its $5.18 million monthly sales figure in January 2022, and it is apparent that the digital NFT land market has ostensibly dried up.

As a result, crypto investors who invested in these digital NFT lands during the boom cycle are not only staring at huge losses on their investments, but are also in a dilemma of whether to purchase more virtual land or simply exit their investments.

Why Billionaire Investors Prefer Physical Land Investments

Unlike retail crypto investors though, billionaires are doubling down on investments in physical farmland and resort properties, shunning the speculative digital NFT land market in favor of real-world investing.

Having benefitted immensely from the V-shaped recovery in the stock market in 2021, the world’s richest such as Bill Gates and Jeff Bezos are acquiring thousands of acres of farmland across the USA.

The digital NFT land market may have been a speculative bubble, but it was not entirely baseless. The rise of the metaverse and the potential for virtual real estate to become a significant part of our digital lives is undeniable.

Major companies like Facebook and Microsoft have already made significant investments in the metaverse, and it’s likely that more companies will follow suit.

Despite the current downward trend, it’s possible that digital NFT land prices could rebound in the future.

The metaverse is still in its early stages, and there’s a lot of potential for growth and innovation. If virtual real estate becomes more valuable and in-demand in the future, those who invested in NFTs during the early stages could potentially see significant returns.

However, it’s also important to recognize the risks involved in investing in speculative assets like digital NFT lands.

As we’ve seen, prices can be highly volatile and subject to sudden drops. Retail investors who put their money into NFTs during the peak of the crypto boom may have suffered significant losses. In contrast, billionaire investors who are focused on real-world assets like farmland and resort properties are less likely to experience such extreme fluctuations in value.

About the author

Murtuza Merchant is a senior journalist and an avid follower of blockchain and cryptocurrencies.

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