T.The metaverse has been one of the hottest topics in the investment world in recent months, and many investors are eager to get a piece of the pie.
Within the metaverse, users will be able to interact with each other through virtual reality. It will also be possible to buy virtual land and other assets, as well as live completely immersive digital experiences.
Cryptocurrency also plays an important role within the metaverse. Whether you’re already investing in cryptocurrencies or planning to get involved now, here’s what you need to know about the impact the metaverse could have on your investments.
What does the metaverse have to do with cryptocurrencies?
One of the most important ways cryptography and metaverse intersect is through non-fungible tokens (NFTs).
NFTs are a form of digital ownership and allow users to buy and sell virtual goods, services and experiences within the metaverse. For example, if you wanted to buy a piece of land within the metaverse, you would use cryptocurrency to buy the NFT for that land. That NFT, then, would serve as digital proof that you are the sole owner.
Ethereum (CRYPTO: ETH) is the largest host for NFT markets, so it could play a big role in the metaverse. If an NFT is based on the Ethereum blockchain, it means that you will pay for it using an Ethereum based token, such as Ether. The more people use these tokens, the more Ethereum will grow.
There are also other cryptocurrencies, such as Decentral (CRYPTO: MANA) And The sandbox (CRYPTO: SAND), which are built exclusively for the metaverse. Not only can users purchase virtual goods or services with these cryptocurrencies, but in some cases they can also use their tokens to vote on policies or other regulations within the metaverse.
What does this mean to you?
The metaverse could have a huge impact on cryptocurrency, but that alone doesn’t necessarily mean you should rush into investing. Both the metaverse and cryptocurrencies are still speculative at this point and no one is sure if they will be successful in the long run.
Whether you’ve already invested in cryptocurrencies or are simply considering it, be sure to look at the big picture. Does that cryptocurrency have uses outside of the metaverse? If so, how likely will it continue to grow over time? How does it position itself relative to its competitors?
The more you know about the cryptocurrencies you are interested in, the easier it will be to choose the right ones for your wallet. By sticking to cryptocurrencies that have solid long-term potential (with or without the metaverse), your investments are more likely to be successful.
Both cryptocurrency and metaverse could see tremendous growth in the future, but they are still risky investments right now. However, doing your research could help limit risk, giving your investments a better chance of thriving over time.
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Katie Brockman owns Ethereum. The Motley Fool owns and recommends Ethereum. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.