Is Crypto the Money of the Metaverse?

Making purchases and other deals is one proponent of the expanding metaverse. But what will be used as money in the metaverse? It is widely predicted that cryptocurrency, or crypto, may become the official currency of the metaverse.

 

Medium of Exchange

One role of any money or currency is that of a medium of exchange.  A specified amount of currency is given and in return a specified amount of goods or services is received.  Crypto is already playing that role in many virtual worlds within the metaverse.

 

Enabling Metaverse Transactions

Shopping is a large part of a lot of metaverse platforms, from buying designer clothing to purchasing a virtual house or a plot of real estate.  Crypto is often used to facilitate these transactions.  It is also being used for online gaming and gambling.

 

Their Own Countries?

Just as the dollar is the currency of the United States and the Yen for Japan, virtual worlds within the metaverse have adopted their own kinds of cryptocurrency. For example, one of the largest virtual worlds – Decentraland – has the MANA as its official cryptocurrency. Another virtual world – Sandbox – uses the SAND. Ether, another cryptocurrency, is the most commonly used cryptocurrency for digital land purchases. [1] These are in addition to cryptos such as Bitcoin, which is widely used across the metaverse and not specific to one virtual world.

 

Put It on My Visa

Highlighting the growing role and importance of crypto, Visa, Mastercard, and PayPal have started offering crypto payments on their platforms.

 

Link Between Virtual and Physical

Crypto may serve as a bridge between the virtual and physical worlds.  As cryptos trade on exchanges and have prices associated with them, they allow investors to calculate the value of their digital assets in fiat money [2] and their returns over time. 

 

Why Crypto for the Metaverse?

Some characteristics of crypto that make it attractive to use in the metaverse include:

  •  Ability to transfer value online without the need for a middleman like a bank or payment processor
  • Not issued or controlled by any government or central authority
  • Backed by blockchain technology which publishes transactions publicly making it almost impossible to manipulate
  • Security provided by transactions that are verified by huge amounts of computing power 
  • Freedom to transact with people on the other side of the planet as easily as paying with cash at your local grocery store

 

Crypto – Enabling Metaverse Transactions

Cryptocurrencies are vital in facilitating transactions in the metaverse. The growth of crypto has the potential to fuel the growth of the metaverse.

 

 

The Fount Metaverse ETF (MTVR)

The Fount Metaverse ETF seeks to provide investment results that, before fees and expenses, generally correspond to the performance of the Fount Metaverse Index.  The index was designed to measure the performance of companies that develop, manufacture, distribute, or sell products related to metaverse technology.

 

MTVR looks to invest in companies that may benefit from the ability to transact in the metaverse as facilitated by crypto, as well as companies providing services to enable these technologies.

 

For top 10 holdings, please click here.
 


[1] Hou, Felicia, How to Shop in the Metaverse: The Cryptocurrencies You’ll Need to Buy and How to Get Them, Fortune, 2/16/22

[2] Fiat money – currency issued by a central government that is not back by gold or any other commodity

profile
Bong-Geun Choi Chief Economist

Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 855-425-7426 or visit our website at www.fountetfs.com. Read the prospectus or summary prospectus carefully before investing.

Exchange Traded Concepts, LLC. serves as the investment advisor to the Funds. The Funds are distributed by SEI Investments Distribution Co., (SIDCO) 1 Freedom Valley Drive, Oaks, PA 19456. SIDCO is not affiliated with Exchange Traded Concepts, LLC. or Fount Investment Co. Ltd.

Risk Disclosure:

 

Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated objectives. In addition to the normal risks associated with investing, international investments may involve the risk of capital loss from unfavorable fluctuation in currency values, differences in generally accepted accounting principles, or social, economic, or political instability in other nations. Emerging markets involve heightened risks related to the same factors, as well as increased volatility and lower trading volume. 

 

The Funds’ concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors. For MTVR, the Fund may be concentrated in the entertainment and interactive media & services industries. The entertainment industry is highly competitive and relies on consumer spending and the availability of disposable income for success, which may cause the prices of the securities of companies to fluctuate widely. The prices of the securities of companies in the interactive media & services industry are closely tied to the overall economy's performance. Changes in general economic growth, consumer confidence, and consumer spending may affect them. MTVR may also be subject to the specific risks associated with metaverse companies. These risks include but are not limited to small or limited markets, changes in business cycles, world economic growth, technological progress, rapid obsolescence, and government regulation. Smaller, start-up companies tend to be more volatile than securities of companies that do not rely heavily on technology. Metaverse Companies may rely on a combination of patents, copyrights, trademarks, and trade secret laws to establish and protect their proprietary rights. There can be no assurance that these steps will be adequate to prevent the misappropriation of their technology or that competitors will not develop technologies that are equivalent or superior to such companies’ technology.

 

For SUBS, the Fund may be concentrated in the software industry. Technological changes, pricing, retaining skilled employees, changes in demand, research & development, and product obsolescence can affect the profitability of software companies causing fluctuations in the market price of company securities. 

 

Both Funds are subject to communication services sector risk, which can involve the same risks as being concentrated in the software industry. Network security breaches, potential proprietary or consumer information theft, or service disruption can negatively affect companies’ stock prices.

 

The Funds are non-diversified. The Funds are new and have limited operating histories for investors to evaluate. New and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies. In addition to the normal risks associated with investing, investments in smaller companies typically exhibit higher volatility.