Because these 3 metaverse-focused crypto projects are soaring today

What happened

It is undeniable that metaverse-linked cryptocurrencies have been among the least likely candidates for price appreciation in 2023. Indeed, the price action with this group of assets has been dismal, with many tokens in this space losing 80% of their value, or more, in 2022 alone.

However, with a new year has come more optimism for this industry. Starting at 1:45 pm ET, To flow (TO FLOW 14.18%), Decentraland (MANA 5.29%)And The sandbox (SAND 2.71%) have increased by 13.7%, 12.6% and 12.1% respectively in the last 24 hours.

These moves appear to be tied to a number of interesting catalysts for these projects.

Flow has reported a stabilization in transaction volume over the past month, which is important for investors, as it is a non-fungible token (NFT)-focused blockchain project that has been in decline for some time. Flow is also among the projects that have reduced its headcount, making its growth prospects less likely to materialize.

Decentraland reported Jan. 6 that an upcoming architecture and design competition will be able to welcome 50,000 visitors over a five-day period. This event will be watched closely by those who are bullish on the potential of digital real estate over the long term.

Finally, The Sandbox has reported some pretty impressive sales of digital land parcels in recent weeks, with proceeds totaling over $1.6 million. So while demand appears to remain very low in this space, The Sandbox remains among the key places investors seem to be looking at right now.

So

Whether it’s transaction volumes, construction activity, or any activity metrics with metaverse-related crypto projects, it’s been a terrible year in this industry. As a result, investors looking to justify the high valuations assigned to these tokens in 2021 on projected growth have had little to hold on to this crypto winter.

That said, these three projects certainly offer speculative upside potential for investors looking to participate in this crypto rally. Overall, cryptocurrencies and other digital assets such as NFTs are difficult to value. This can lead to significant overstatements and understatements in terms of valuation from time to time. If another rally is starting, these high-beta tokens could be among the best ways for aggressive investors to capture this rally.

Now what

Whether it’s smart to try to capture this rally (or what a falling knife might be instead) will be seen in hindsight. Today’s rally is quite broad with most risky assets taking a leg higher. Various macro forces appear to be driving that risk sentiment, so until the sentiment cools off, it’s possible the cryptocurrency market could have a decent year.

That said, until these metaverse projects can show significant growth, it’s hard to point to a key catalyst for this group. In the absence of fundamentals, this rally becomes much more precarious. So, this is an area that I will be keeping an eye on from the sidelines, at least for now.

Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the titles mentioned. The Motley Fool has a disclosure policy.

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