NFT and Metaverse lettering with blank coins.

Metaverse and NFTs are cool, but they’re way too overhyped

The Fed’s ultra-loosened monetary policy initiated some crazy trends within the last few years, like absurd pumps and dumps in meme stocks, tens of billions of dollars of market capitalizations for dog projects like dogecoin, multiple companies reaching multi-trillion-dollar valuations, etc. 

Similarly, metaverses and NFTs gained fame during the last couple of years, with many irrelevant metaverse-related projects attracting big investments. Suppose you’re building a metaverse for dogs, where dogs hang out in a virtual environment. In what financially normalized world would this project make even a bit of sense? However, if such a project is announced today, it’d receive millions in seed funding, thanks to Jerome Powell and the financial absurdity the Fed was forced to create during COVID-19.

Top NFT project by valuation

Bored Ape Yacht Club (BAYC) on Ethereum is the most valuable NFT project right now, with a floor price of over 90 ETH for each NFT. The use case of these NFTs? They are used in a metaverse game that is not even worth one of its NFTs; a few freelancers can design a better game for $200. Moreover, calling the reserveApes() function of the BAYC NFT contract allows the BAYC team to mint unlimited NFTs as they didn’t put any limit to their so-called “reserve” function, but at this point, who cares? It’s all about buying an NFT and hoping that someone offers you more than your cost on it. It’s not really about its usage in a metaverse or any value behind it; it’s unfortunately all about greed fueled by pure stupidity.

It’s not even a JPEG on the blockchain!

Uploading a JPEG to the Ethereum blockchain requires quite a lot of gas. That’s why most NFT minters on Ethereum choose a cheaper, non-Ethereum option. They simply upload an image to an IPFS and store its URL on the Ethereum chain. With the exception of a very few NFT projects, this is the case with almost all the NFTs on the Ethereum chain. Even though there are blockchains available that allow the upload of images on-chain relatively cheaper than Ethereum, this mania seems way too Ethereum-concentrated, with almost all the mega-sales being performed on Ethereum.

Multiple metaverses?

Facebook’s move to build a metaverse seems like a game-over for most of the metaverse-related projects. Suppose you’ve decided to invest in the land of a metaverse. Would you invest in the virtual land of Decentraland or any other digital currency-based metaverse with a crappy GUI that also requires gas/fee to use, or a Facebook’s centralized metaverse that everybody knows about through WhatsApp/Instagram promotion and everybody’s looking forward to, including your neighbors? 

There is a good chance that all these projects that are building their own e-worlds or metaverses will soon run out of funds. Their visual games remain left with zero activity and transform into e-Goblin towns instead of metaverses. We had seen this happen before with CryptoKitties and other projects back in 2018- 2019. Though they are once again gaining quite a lot of attention due to NFT mania, it should be kept in mind that they were all pretty much ghost projects throughout the 2018-2020 bear market, and there is a good chance that they turn into a ghost town once again as soon as this NFT craze settles.

End of quantitative easing

As the Fed is nearing the finish of tapering and policy normalization, we should all prepare for interest rate hikes and balance sheet reduction next. The last couple of months remained quite rough for Wall Street, and due to the correlation between stocks and the digital currency industry. Digital currencies lost approximately 40% of their market capitalization as well. However, it should be noted that only the tapering caused all this to happen; one can only imagine the damage that will be done to the stocks and its correlated assets (including digital currencies) once the Fed actually raises rates and goes towards balance sheet reduction. The recent extremely high inflation report indicates that the Fed has to raise interest rates and raise them to a big extent, hard and fast. Metaverse and NFTs? There’s hardly any chance that they’ll be able to keep up with their high liquidity and valuations once the real bear market hits.

Watch: CoinGeek New York panel, The New World of NFTs

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.

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