Metaverse crypto tokens have emerged as a new sub-asset class within the crypto markets, attracting investors who want to get in early on what could turn out to become the next iteration of the internet. Early-stage versions of the metaverse, such as Decentraland and Sandbox, are powered by cryptocurrencies that act as currencies in these virtual worlds. For investors, they offer an avenue to gain investment exposure to this new and fast-growing industry.
Investing in cryptocurrencies, Decentralized Finance (DeFi), and other Initial Coin Offerings (ICOs) is highly risky and speculative, and the markets can be extremely volatile. Consult with a qualified professional before making any financial decisions. This article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies nor can the accuracy or timeliness of the information be guaranteed.
What Is Metaverse Crypto?
Metaverse crypto is a sub-set of cryptocurrencies that enable users of blockchain-powered virtual worlds to buy and sell digital assets, such as virtual land, real estate, or avatar items. Like all crypto assets, however, they are high-risk investments, which means conducting thorough research is essential before making the decision to add metaverse tokens into your crypto portfolio.
While leading metaverse tokens, such as Decentraland’s MANA, Sandbox’s SAND, and Axie Infinity’s AXS, experienced incredible price rallies in the 2021 crypto bull market, their prices collapsed in 2022 alongside the rest of the crypto market, highlighting the riskiness of this sub-asset class.
The metaverse has also attracted major global brands looking at new avenues to build their brand, reach new customers, and increase customer loyalty. Nike and Gucci, for example, have already taken the leap, exploring ways that NFTs could add to their customer experiences. Nike has purchased NFT fashion startup RTFKT, with the aim to sell Nike shoes in the metaverse, while Gucci hosted its very own Gucci Vault Land in the Sandbox metaverse late last year.
How to Buy Metaverse Crypto
Buying metaverse coins works the same way as buying Bitcoin, Ethereum, or any other digital currency on a crypto exchange. Cryptocurrency exchanges are online trading platforms similar to traditional online brokers like Fidelity or Charles Schwab–that enable you to buy and sell digital currencies for U.S. dollars or other cryptocurrencies.
Here’s how it works!
Step 1: Sign up for a crypto exchange
Choose a reputable crypto exchange, like Coinbase, Kraken, or Uphold, where you can buy metaverse tokens by depositing U.S. dollars using a payment method that suits you. Register an account and complete the exchange’s customer onboarding process.
Step 2: Confirm your payment details.
Next, you need to choose the payment method you want to use to fund your trading account. Wire transfers are typically accepted by all U.S.-based crypto exchanges.
Step 3: Select the metaverse token you want to buy, view the current market price, and press “buy.”
Once you have funded your account, choose the metaverse token(s) you want to purchase, place an order for the amount you want to buy, and wait for your order to be filled. If you place a market order, your purchase will be completed within seconds and the tokens will appear in your trading account’s wallet.
Alternative Ways to Buy Metaverse Crypto
Alternatively, you could also purchase metaverse coins on peer-to-peer trading platforms. Unlike on centralized crypto exchanges where you place an order that goes into an order book for a specific cryptocurrency pair, on a peer-to-peer marketplace you can purchase cryptocurrencies directly from another individual using a predetermined payment method and for an agreed price.
Moreover, you could also swap cryptocurrencies you already hold for metaverse tokens on decentralized exchanges (DEXs). Decentralized exchanges only require you to connect your crypto wallet to the trading platform’s smart contract, enabling you to swap one token for another without requiring you to create a trading account or complete a customer verification process.
Unlike traditional brokerage firms, cryptocurrency exchanges are not members of the Securities Investor Protection Corp. (SIPC). Therefore, unless user terms specify otherwise, investors with cryptocurrency assets commingled on a custodial cryptocurrency exchange could potentially lose their funds as unsecured creditors.
What You Need to Open a Cryptocurrency Exchange Account
To open an account on a cryptocurrency exchange, there are certain requirements. Let’s take a look at them.
The personal information and documentation required to complete a crypto exchange’s onboarding process typically includes:
- Full name
- Email address
- Phone number
- Home address
- Proof of address
- Government-issued ID
Every exchange requires customers to make a minimum deposit to start trading. The minimum deposit differs from exchange to exchange but is typically between $10 to $20. Some crypto trading apps, such as Robinhood, even allow you to start with as little as $1.
Types of Cryptocurrency Exchanges
Centralized crypto exchanges are online trading platforms akin to traditional online brokerages where traders and investors can buy and sell cryptocurrencies after completing a customer onboarding process and depositing U.S. dollars to fund their trading accounts.
Decentralized crypto exchanges are trading platforms where smart contracts replace a centralized orderbook, enabling crypto traders and investors to swap tokens for one another simply by connecting their crypto wallets. No identity verification is required.
Arguably the most compelling argument for trading on decentralized exchanges is that situations like the FTX collapse cannot affect user funds as assets are held in users’ wallets, separate from a centralized exchange wallet. Therefore, if a decentralized exchange gets hacked or the company operating it goes bankrupt, user funds remain unaffected.
Hybrid crypto exchanges combine a centralized orderbook to match trades with decentralized token storage to enable crypto traders to experience the best of both centralized and decentralized exchanges.
Best Cryptocurrency Exchanges
Factors to Consider When Opening a Cryptocurrency Exchange Account
Security: A high level of security is arguably the most important aspect of a reputable crypto exchange. Ensure that you choose an exchange with a strong cybersecurity track record that has not experienced any hacks.
Fees: Trading fees and other exchange fees (such as withdrawal fees) can eat into your returns. Ensure that you choose an exchange with low fees to mitigate the impact of fees on your trading revenues.
Number and quality of supported cryptocurrencies: If you are looking to purchase metaverse tokens, make sure the exchange you choose supports the assets you would like to purchase. While most leading exchanges support the top metaverse tokens, some offer more liquidity than others.
Wallet safety: Choose an exchange that provides secure crypto wallets, ideally with added safety features such as withdrawal wallet whitelisting. Address whitelisting is a security feature provided by numerous crypto exchanges that only allows cryptocurrency withdrawals to specific “whitelisted” external wallet addresses predefined by the user.
Storage and custody: Ensure that the crypto exchange you choose holds most, if not all, customer assets in cold storage to mitigate the risk of theft of your assets held on the exchange.
Centralized vs. decentralized: While decentralized exchanges arguably offer the more secure trading avenue, centralized exchanges are typically regulated (at least to some degree), thus providing more customer protection than their unregulated decentralized counterparts.
Do I Need Metaverse Crypto?
If you are looking to explore virtual worlds like Decentraland or Sandbox, you will require these metaverses’ digital tokens to make in-platform transactions. Whether you want to purchase new wearable items for your digital avatar or invest in some virtual land, you will require the metaverse’s in-world currency in your crypto wallet.
How Can I Earn Crypto in the Metaverse?
Land Sales: The buying and selling of virtual land has become one of the most alluring earning opportunities in the metaverse. Some parcels of Land–virtual land sold in the form of NFTs in Decentraland–have been sold for hundreds of thousands of dollars.
Digital Asset Creation: By creating and selling new digital assets–typically in the form of NFTs–metaverse users can earn crypto.
Selling Accessories: Avatars can be customized with various items, such as clothes and shoes. These can be bought and sold as NFTs, enabling metaverse users to make money in the metaverse.
Providing Services: Like in the “real” world, metaverse users can offer services to earn crypto, such as promoting brands by offering virtual advertising space or acting as a virtual tour guide through the metaverse.
Hosting Events: Hosting virtual events, such as concerts and art shows, has emerged as a popular way to earn revenue in the metaverse.
What Are the Top Metaverse Coins Right Now?
Decentraland’s MANA token is the leading virtual world’s in-platform currency, which enables users to transact in the early-stage metaverse. From buying parcels of virtual land to buying wearable items, MANA is required to make it happen.
The Sandbox has been able to attract some of the biggest artists, influencers, and brands to the metaverse by offering a versatile virtual world, powered by the SAND token. Like Decentraland’s MANA, SAND acts as the in-world currency required to make transactions.
Axie Infinity (AXS)
Axie Infinity is arguably one of the most popular metaverse-esque blockchain games, enabling players to battle their in-game avatars–called Axies–in various virtual lands, with the winners earning tokens. AXS is the game’s governance token that allows players to make decisions about the game’s development. It is also used in the game’s NFT marketplace as a transactional currency.
It’s important to remember that, like all crypto assets, metaverse crypto assets are high-risk investments. Therefore, conducting thorough research is essential before making the decision to add metaverse tokens to your crypto portfolio.