Alternative Investments

CEO of Grayscale on the Metaverse and Crypto Investment Opportunities

  • Michael Sonnenshein says there’s an ongoing convergence between virtual reality, gaming, and digital assets.
  • The Grayscale Decentraland Trust provides an investment opportunity in the metaverse.
  • One pure-play way to gain exposure is by holding the native currency of an application, Sonnenshein says.

The metaverse has been a hot topic in the last couple of weeks after Facebook rebranded to Meta, sending investors sprinting to buy up digital assets tied to some of the leading contenders in the space.

While gaming has always been a mega-industry, the emergence of an interactive sensory experience powered by VR headsets combined with crypto is like the ultimate Thanksgiving dinner, equipped with sides and all. 

But Grayscale Investments, the world’s largest digital currency asset management firm, was already sitting at the dinner table. Grayscale Decentraland Trust, which launched in February, gives clients exposure to a leading metaverse platform known as Decentraland

“A couple of years ago we began to notice that within the digital asset ecosystem, there was starting to be a convergence between virtual reality, gaming, and digital assets,” Michael Sonnenshein, CEO of Grayscale Investments, told Insider in an exclusive interview. 

The firm has been busy identifying protocols across the digital sector, including in payments, privacy, video transcription and file storage, gaming, and virtual reality. They walk the line between pinpointing opportunities that are compelling and worth bringing to investors while taking into account what their clients are telling them they want exposure to.  

Anyone who sees the graphics and themes associated with some of these metaverses can easily understand how this technology will shape the future. But Sonnenshein says there’s an important crossroads that investors need to be paying attention to when it comes to the adoption of metaverses, and it has to do with the underlying infrastructure they are built upon. 

He noted that it was only a couple of decades ago that we saw the emergence of web 1.0, which was a read-only interface. We then moved to a web 2.0, which allowed layers of interactive user interfaces to be built, such as e-commerce and social networks. The programs on these platforms are centralized and run by intermediaries or the companies that built them. 

“What we now find ourselves on is the dawn of the web 3.0, where we’re seeing, for the first time, an advocacy on behalf of the user [or] the individuals that are participating in these types of activities that want greater ownership and control over their experiences, their data, and how value is being shared and received,” Sonnenshein said. 

Opportunities for metaverse investors — including one overlooked angle

As for how investors can gain exposure to the metaverse, Sonnenshine says one pure-play way is to hold the native currency of an application. There are many leading metaverse contenders that have drawn early investor attention, including Decentraland, Bloktopia, and Star Atlas. Each of these metaverses uses its own currency, and players must hold a metaverse’s native token in order to transact inside of them.  

For example, Decentraland’s digital currency is MANA, and it’s already up more than 4,000% year-to-date, according to CoinMarketCap

But Grayscale offers an alternative for investors looking to gain access to the profits a metaverse can provide. The Grayscale Decentraland Trust purely holds — on a passive basis — MANA, providing its clients with exposure to Decentraland’s native currency. And while you could buy the token directly, this route may be more familiar to traditional investors who aren’t well-versed in investing in crypto.

The investment vehicle is also accompanied by financial statements, tax statements, disclosures, and all the things that investors are typically used to seeing, Sonnenshein added. 

“There’s also the ability to make investments into the product using retirement assets, for example, like an IRA or Roth IRA, things of that nature,” Sonnenshein said. “And so there are more pools of assets that have the potential to make the investment because it’s through an investment vehicle than when you attempt to purchase MANA outright.”

Whether one wants to invest directly in these tokens or prefers that Grayscale does the heavy lifting, Sonnenshein advises investors to get educated on the metaverse. Understanding what it provides and how users could interact with this new digital world will help people wrap their heads around it. 

And while it may seem crazy to think that someone would rather spend their money on a piece of land that doesn’t physically exist instead of real land, that reality might not be too far away. 

“I think because the idea can be quite abstract, it really comes down to learning,” Sonnenshein said. 

One thing many investors may not realize is the multiple streams of potential profits that an investment in digital real estate can bring. Just as with physical real estate, the value of digital land can appreciate exponentially as a metaverse gains popularity and demand for property rises. In addition, owners can collect rents on digital properties from advertisers who lease the space in order to show their ads to other users.

But some of the biggest returns on an investment in digital property can come from a metaverse’s native token gaining value. While real estate in the real world can appreciate in value, the value of the dollar rarely rises — in fact, thanks to the highest inflation rates in 31 years, a dollar doesn’t go nearly as far as it once did. 

Meanwhile, after Zuckerburg’s announcement and the subsequent run on metaverse cryptocurrencies, many native tokens have become far more valuable than they once were. For example, MANA was trading at around $0.08 in January, but today it’s trading at $3.18. 

The double whammy of increasing property values and increasing token values can combine to provide investors with incredible returns. For instance, a virtual piece of property in Decentraland recently sold for 1,295,000 MANA, which translated to about $913,000 at the time of sale. Based on the token’s value today, that property is now worth $4,082,090.

But if investing in crypto still sounds foreign, Grayscale provides exposure to digital assets in a traditional context.


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