Metaverse Tokens Experience Ongoing Correction
Metaverse cryptocurrencies, such as Sandbox (SAND), Decentraland (MANA), and Axie Infinity (AXS), have been facing a downturn since their peak prices in early December. A recent report from Glassnode indicates that even amidst this price decline, there is notable on-chain activity that suggests investors are accumulating these assets. In light of this situation, FXStreet has consulted various cryptocurrency market experts to gather their perspectives on the Metaverse sector.
Is the Metaverse Crypto Sector Facing a Downturn?
Examining market capitalization, data from CryptoSlate reveals a sharp drop in the Metaverse’s market cap, plummeting from $23.54 billion to $4.9 billion, marking a significant decline of $18.64 billion since the height of the Metaverse boom in 2021. Furthermore, the sector’s market dominance has decreased from 1.16% to 0.19%. According to the Glassnode report, despite the decline in prices and diminishing enthusiasm surrounding Metaverse tokens, on-chain metrics show that substantial investors are actively accumulating these assets, thereby lowering their average purchase costs. The report emphasizes that key tokens like Sandbox, Decentraland, and Axie Infinity, which were at the forefront during the Metaverse’s rise, are still being actively invested in, despite the fading excitement.
Expert Insights on the Metaverse Sector
FXStreet reached out to industry specialists to discuss the current state of the Metaverse. Tracy Jin, COO at MEXC, responded to questions about the factors leading to the stagnation of metaverse coin prices. She noted that the Metaverse was once seen as the next pivotal technology for digital interaction, akin to the rise of the internet during the early 2000s. However, the enthusiasm around these projects has waned due to a lack of tangible applications demonstrating their success. Shifts in market cycles, investor sentiment influenced by the rise of meme coins, and the growing prominence of Artificial Intelligence (AI) and Real World Assets (RWAs) have contributed to a noticeable decline in user engagement and trading volume within the Metaverse.
Jin further elaborated on whether the sluggish price movements indicate a diminishing interest in the Metaverse itself or if they are reflective of broader market conditions. She highlighted that the primary hurdle faced by metaverse tokens is the slow adoption of mainstream technology that addresses everyday issues. The rising focus on AI and RWAs has diverted attention away from virtual environments, as unlike DeFi and meme coins that offer clear financial incentives, metaverse tokens have struggled to maintain relevance due to limited utility outside their ecosystems. The overall downturn in the crypto market, combined with economic uncertainties, has caused investors to become more risk-averse, prioritizing assets with clearer value propositions.
Institutional Interest Shifts Away from Metaverse
When asked about institutional interest in metaverse projects, Jin observed that many investors have redirected their focus towards AI, DeFi, and RWA sectors. As more institutional capital flows into these areas, metaverse projects must work to re-establish their relevance. This could involve integrating AI functionalities, enhancing interoperability, or broadening their applications beyond gaming and virtual real estate. Nevertheless, it would be premature to dismiss the Metaverse entirely, as major technology companies like Meta, Apple, and Nvidia continue to invest heavily in virtual and augmented reality developments, which could indirectly support blockchain-based Metaverse initiatives. The concept of digital ownership remains significant, suggesting that as technology continues to evolve, there may be a revival of interest in metaverse tokens.
Identifying Growth Drivers in the Metaverse
Christel Buchanan, co-founder and CEO of Pivotal, shared her thoughts on projects within the metaverse space that show potential for growth. She highlighted that the most promising developments are emerging from projects that emphasize practical utility over speculative hype. The integration of AI with spatial computing platforms stands out as particularly noteworthy, with initiatives that utilize conversational interfaces to bridge the technological gaps that have historically limited metaverse adoption. Successful implementations are increasingly focusing on specific applications such as collaborative design, education, or entertainment rather than labeling themselves as “metaverse” projects.
Buchanan also commented on whether the current phase reflects a need for consolidation and building or indicates a shift away from the metaverse. She believes this phase is one of recalibration rather than abandonment, with the industry moving past initial hype to focus on concrete applications and infrastructure. While the term “metaverse” may be less prevalent in marketing efforts, the underlying goal of creating immersive, interconnected digital environments continues to progress.
Long-Term Vision for Metaverse Adoption
When discussing the long-term vision for metaverse adoption, Buchanan emphasized three crucial factors: accessibility, utility, and interoperability. Reducing technical barriers will be essential for fostering exponential growth in creator participation. Felix Xu, co-founder and CEO of ARPA Network and Bella Protocol, provided insights on how current market sentiment around metaverse projects differs from the peak excitement of 2021–2022. He noted that the market has become more discerning, with investors focusing on projects that showcase solid fundamentals, such as real user growth and meaningful digital ownership experiences.
Xu also reiterated that the current phase signifies a healthy recalibration, filtering out weaker projects while highlighting those with genuine user value. The industry is refining its approach to metaverse concepts, establishing a foundation for substantial growth. He pointed out a gradual normalization of digital ownership and identity, indicating that people are becoming increasingly comfortable with owning digital assets. This quieter phase is seen as a crucial step toward setting the stage for a more engaging and creative future in the metaverse.
Market Evolution and Future Prospects
Mike Cahill, CEO at Douro Labs, expressed his view that the recent slowdown in price movements is less indicative of waning interest in the Metaverse and more about the industry’s overall evolution. Maturity in the market has led investors to prioritize fundamentals over mere hype. The transition from imaginative concepts to tangible implementations, including DeFi frameworks and real-world asset integrations, is now taking precedence.
Irina Karagyaur, co-founder and CEO of BQ9, concluded the expert discussions by stating that the Metaverse’s long-term viability hinges on who is responsible for its development. If dominated by a few centralized entities, it risks becoming irrelevant. However, if ownership is placed in the hands of communities, with emphasis on digital rights, open standards, and decentralized governance, the potential for the Metaverse to become something much greater exists. Mainstream engagement will likely develop gradually as AI enhances digital environments, hardware becomes more accessible, and the Metaverse integrates into everyday digital life. The focus will shift from escaping reality to enhancing it, revealing where the true opportunities lie.
