Bullishness over metaverse fades as crypto fall intensifies

Crypto crash is brutal. Especially, almost decimation of Lune, a sister cryptocurrency of TerraUSD has made headlines world over. It has also inspired many memes that question the viability of the cryptocurrency ecosystem. In the last few days, Luna's value has dropped by more than 80 per cent, leading to massive erosion of investors' wealth. Such phenomenon has created fear among most bullish crypto investors who have been advocating cryptocurrency as the future of global payment system. No doubt, broader crypto markets including most popular digital currencies like Bitcoin and Ethereum have also lost value.

While there are many schools of thoughts on what are the reasons for such crash, one thing that has emerged out is that use cases of blockchain ecosystem has taken a huge beating in recent months. The backbone of cryptocurrencies is made of blockchain-powered system. Distributed ledger and recording of transactions have been facilitated by blockchain-driven solutions. So, any beating of crypto ecosystem will definitely affect developers focussed on providing blockchain-based solutions. There are many startups, crypto exchanges and fintechs that design, develop and implement these solutions. It will be interesting how these startups perform if the slump in crypto market continues.

Not only cryptocurrencies, but another blockchain-based digital asset- NFTs (non-fungible tokens) have also looking at losing investors' interest as global uncertainty over high inflation and geopolitical turmoil continues. NFTs have been very popular in the recent years and many see as the true testimony of Web 3.0. Reports suggest that total NFT transaction activity went down from $3.9 billion to $964 million between February and March. "That speculation isn't limited to cryptocurrencies. Both NFTs and digital real estate in the metaverse have been just as vulnerable to speculation. And that raises concerns for both," Morgan Stanley said in a recent note. So, the risks for all digital assets that have emerged as the Web 3.0 movement are real. This takes us to the question of what will be the fate of metaverse if such volatility continues? Nobody has the answer yet.

Metaverse has already seen rising adoption among users in recent years. Global consulting major Gartner has predicted that by 2026, 25 per cent of people will spend at least one hour a day for work, shopping, education, social media, and entertainment in the metaverse. Most IT services companies and startups have come with specific metaverse suite that will facilitate such transition. But if the routs in digital assets continue across the world, spend on such emerging technology areas is likely to be slashed. We have seen rising fund flow to digital assets-based companies like crypto exchanges, NFT-creators and supporting technology providers from venture capital and private equity funds. Current crash and subsequent investors' worry don't augur well for the whole ecosystem.

India has seen rising user base of both cryptos and NFTs in the last few years. Especially, crypto adoption has been huge with people in hinterland even participating in such digital assets. It is, therefore, vital that the interest of such investors should be protected through education and awareness, sans any existing regulations.