|pic credit: The Motley Fool|
So, the Metaverse is bringing in millions of dollars. Is that the case? The Metaverse, a futuristic notion, has been causing quite a stir on the internet over the last few months. Like many others, I’m curious to see if this is the next big thing, or if it’s just a massive fad that’s supporting a bubble on the verge of bursting!
Let’s have a look at some of the most crucial factors to consider before investing, or deciding whether you should invest or withdraw your money.
Factor #1. The Influence of Bitcoin
First and foremost, we must discuss Bitcoin, the big daddy. Consider the Bitcoin market as a teetering house of cards. Although it appears to be amazing, it may be quite susceptible. Altcoins with various functions, including Metaverse crypto games, are housed in the smaller card houses surrounding the outside.
When you’re putting together a house of cards, all you can think about is how impressive the finished product will be. This is exactly how it feels when the price of Bitcoin rises. People are buying at increasingly greater prices, often with money they don’t have, and without considering all of the risks involved.
Assume that the cards at the bottom represent those who have the most Bitcoin. The whales are their common name. As we get closer to the top, investors are holding less and less Bitcoin. It only takes one whale to sell to set off a chain reaction.
This isn’t limited to Bitcoin. It has a knock-on effect, making all altcoins suffer as well. One explanation for this is that the market is over-leveraged. This simply means that people can purchase Bitcoin using money they don’t actually have. Buying on margin is what it’s called.
Someone buying $80,000 worth of Bitcoin with only $8,000 of their own money is an example of this. They do this by multiplying their money by ten using a margin. This not only boosts their potential earnings but also increases their risk.
This means that if the value drops too low, they may be obliged to sell to reduce their risk. As a result, the price drops even further, prompting more people to sell for identical reasons, resulting in a downward spiral. “Selling begets more selling until you arrive at an equilibrium on leverage in the economy,” said Devin Ryan of JMP.
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Simply said, the crash would not end until most leverages had been removed from the market. Worryingly, this is a relatively simple scenario. Bitcoin traders are driving the huge fluctuations in all cryptocurrencies, not just Bitcoin, by utilizing up to hundred-to-one leverage.
Why does Bitcoin important when it comes to investing in the digital Metaverse?
Simply put, Bitcoin was the first, and it established cryptocurrency as a legitimate form of payment. As a result, many investors regard Bitcoin as the crypto-reserve currency’s currency. Many investors put their money into Bitcoin first and then move on to altcoins.
To demonstrate this argument, most crypto investors simply compare Bitcoin to traditional currencies such as the dollar. As a result, it’s understandable why when Bitcoin falls in value, the entire market falls with it.
This could be one of the causes for the drop in Metaverse cryptocurrency pricing, as Bitcoin has been bouncing around in price and hasn’t truly pushed all-time highs in a long time.
Factor #2. Fear, Uncertainty & Doubt (F.U.D)
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Over-leverage may be to blame for the large price swings, but the fear and uncertainty sparked by the new virus variety could make matters even worse. Unless you invested in Omicron, a cryptocurrency that had a quick rise in value followed by an equally swift fall.
You may have heard the term FUD thrown about a lot lately, especially during the height of the epidemic. Fear, uncertainty, and doubt are represented by this symbol. Negative news can affect market prices, which is why this term is so reviled in the investment industry.
Bitcoin’s price decreased by roughly 8% after the announcement of the new variant. Smaller coins, which normally move in lockstep with Bitcoin, also plummeted. In only one day, Ethereum, for example, has lost 11.6 percent of its value.
Following FUD, the crypto markets typically recover very well, as many committed investors perceive it as a wonderful opportunity to buy the drop. We all know that cryptocurrencies have very strong foundations that aren’t easily disturbed once we get to the point when FUD has little to no effect on the underlying pricing.
This is because if investors aren’t affected by fear, uncertainty, or doubt, then they must all be diamond dealers. There has been a lot of buzz surrounding Metaverse crypto coins, yet many people perceive the Metaverse to be a frightening and confusing concept.
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This has resulted in a lot of negative coverage, which can have a substantial impact on the coin’s performance in the short term.
Factor #3. Influence of the Stock Market
People used to invest in the stock market before Bitcoin, Ethereum, crypto games, or anything else. I can’t just ignore the stock market because, like it or not, it has a significant impact on cryptocurrency. Cryptocurrency is becoming increasingly intertwined with the stock market. Tesla, for example, purchased $1.5 billion in Bitcoin, allowing Tesla stock to benefit from Bitcoin’s volatility.
When the stock market crashes, we often see a crypto market tumble as well. This could be due to investors withdrawing their funds from higher-risk ventures and storing them elsewhere. Consider that for a moment.
If Tesla’s price dropped to $500 tomorrow and you had $10,000 in a hazardous cryptocurrency, you’d probably consider taking some of that money out of crypto and putting it into Tesla, as it’s a much safer option.
If you want to start investing in stocks or cryptocurrency, Public is presently offering a free stock worth up to a thousand dollars if you live in the United States, and Coinbase is currently offering $10 worth of free Bitcoin to everybody who signs up, globally.
No, but honestly, while this does not apply to every investor, it does apply to a large number of them. And the more people who react in this way, the bigger the impact on the broader crypto market will be. The stock market, like the crypto markets, has experienced an anomalous rise in 2021.
This has led to a lot of new investors having unrealistic expectations, but as we previously stated, these returns aren’t typical, and they could be in for a rude awakening when the market crashes. This expansion is attributable to a number of variables, but one that we must discuss is the amount of stimulus that governments around the world are pumping into the economy.
Printing money may be a smart short-term solution, but it might also lead to long-term devaluation of everyday currencies, implying that your dollar will be worth much less than it was yesterday. So, given the amount of extra currency in the system, it’s possible that stock and crypto values have been inflated beyond their genuine value, and that we’re ready for a correction in the near future.
On the other hand, if common currencies, also known as fiat currencies, lose value owing to inflation, this could increase the popularity of cryptocurrencies, as governments cannot directly alter the value of coins by generating more, as they do with paper money.
Stocks and currencies tied to the metaverse have suffered a modest drop in value. Perhaps this is due to the government’s tapering of stimulus, leaving consumers with far less free money to invest at their leisure.
However, while I believe in the Metaverse in the long run, this does not entail that these specific crypto games will soar to new heights. There are numerous methods to invest in Metaverse initiatives, including purchasing the shares of companies that may play a significant part in Metaverse’s development.
So, if any of these crypto Metaverse games sparked your curiosity, it might be worth investing a little amount of money you can afford to lose, but before doing so, diversify your portfolio into stocks and other long-term assets.