The Metaverse and DeFi Are Destined For Different Paths. Here's Why.

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Facebook stunned the world last October when it rebranded itself as “Meta.” With the name change, the social media behemoth that helped shape the internet over the past two decades seemed to have made the decision to ride the hype of the metaverse boom that almost hijacked the latest cryptocurrency bull run.

And Meta wasn’t the only one. Microsoft announced it would adapt its signature software products into its own corporate version of the Metaverse shortly after, as hundreds of crypto projects attached themselves to the new buzzword, adding related words such as NFTs, AR, and VR to their messaging. By the end of 2021, real estate sales in the Metaverse topped $500 million. For entrepreneurs less acquainted with the concept: yes, that means people spent millions of real U.S. dollars on clubs, nightlife venues and stadiums that only exist virtually.

Another lesser-known fact? Most companies building products centered around the Metaverse — a more fully immersive internet involving virtual and augmented reality — use blockchain as a major component. Metaverse developers incorporate key crypto-industry features, such as NFTs (non-fungible tokens) and utility tokens, to power their ecosystems.

To some degree, the intertwining of crypto and Metaverse makes total sense. If you’re creating a virtual space in which people can experience real-world events with other real people, such as live music shows and even wedding proposals, you’re going to need a digital-native currency to power that world’s economy. On the other hand, the association with and reliance on crypto made such startups vulnerable to the dramatic volatility of the crypto industry.

As such, they were just as affected by the crash that sent the crypto industry into a bear market in May, catalyzed by the collapse of Terra (LUNA) from $120 to 2 cents — a 99.9-percent correction — that sent shockwaves through the market. The Metaverse sub-sector of the broader crypto industry was probably hit harder than the DeFi industry (decentralized finance), of which LUNA seemed almost integral.

Just as the value of real, tangible properties skyrocketed nearly 19 percent over the last year, the average price per parcel of virtual lands across the six major Ethereum Metaverse projects dropped 85 percent in August. The agreed-upon reason for the price plunge might be waning interest. Still, there’s a macro-level trend to be aware of: Very shortly, it’s reasonable to predict that Metaverse land prices won’t recover for months or even years. Not until the next bull run drives hype around it again.

Both the Metaverse and DeFi can be considered two very different brainchildren of Bitcoin, the first-ever cryptocurrency and application of blockchain technology. Yet each will fare quite differently in this bear market. Unlike the NFTs that made up the backbone of the…