Institutions flock to metaverse projects

GB Market Commentary 23/08/2022

by Marcus Sotiriou

Bitcoin is consolidating around $21,300 whilst digital asset management firm, CoinShares, reported outflows for crypto focused funds for the second week in a row. As trading volume dropped to $1 billion, the second lowest this year, crypto funds saw minor outflows of $9 million. Despite Bitcoin and the general crypto ecosystem seeing crypto fund outflows, Ethereum (ETH) actually saw inflows of $2.9 million. This is a result of rising optimism leading up to Ethereum’s transition to Proof of Stake, which is the biggest talking point within the whole crypto space currently.

Whilst CoinShares shows outflows for crypto funds, Glassnode shows heavy accumulation from address balances that have less than 1 Bitcoin. This shows that there is a juxtaposition between institutional and retail demand for crypto currently, which is conflicting with previous downtrends where balances less than 1 Bitcoin have typically declined. This potentially shows how this downtrend was driven by institutions who have been caught offside, whilst retail have generally been HODLing and accumulating.

Institutional interest in private markets, however, continues to grow. Invesco, an investment management giant, has launched a metaverse fund that will invest in a myriad of startups. According to a report published yesterday, these startups will include small, medium, and large-cap companies worldwide that are dedicated to metaverse technologies like virtual worlds, non-fungible tokens (NFTs), augmented reality, play-to-earn (P2E) gaming, and artificial intelligence (AI). Invesco’s fund manager, Tony Robers, explained, “we will seek to capitalise on these opportunities through a highly selective, valuation-conscious approach.”

Furthermore, a metaverse project, called Ready Player Me, has raised $56 million in a Series B funding round amid the crypto funding slump. Ready Player Me is a platform that allows people to create virtual avatars that can be used across the metaverse.

Investors include Konvoy Ventures, Collab Currency, Taavet Hinrikus and Sten Tamkivi's Plural Platform and comedian Kevin Hart's Hartbeat Ventures, with Andreessen Horowitz (a16z) leading the round.

The likes of Invesco and other established investment firms developing metaverse funds follows a range of companies entering the metaverse this year, including Samsung. I think this significant introduction of new capital will mean that when the next bull market ignites, metaverse projects will be a key trend for investors to benefit from.