The word “Metaverse” has been around for years, originating in the 1992 novel Snowfall.(1) Since then we have seen versions of virtual worlds that have become almost as immersive as real life for many of its players, for example, World of Warcraft and Second Life. After Facebook rebranded itself as Meta Platforms, the Metaverse became a more mainstream concept. And as with other emerging tech concepts like crypto, blockchain, and NFTs, investors have shown interest in finding ways to invest in the metaverse. This note addresses some of the most common metaverse questions about indices and indexed ETFs using the Alerian Galaxy Immersive Digital Worlds Index (DWRLD) as a benchmark.
First of all, what is the metaverse?
In a broader sense, the Metaverse refers to the “next evolution of social connection and the successor to the Internet”.(2) Just like the Internet, there will be a single Metaverse with no single owner and users will be able to access the Metaverse through their computers and mobile devices. Right now, the metaverse exists through a mix of social media and the game world where immersive role-playing games collide with customizable avatars and currencies.
If it’s in its infancy, why do we already have Metaverse indices and passive ETFs?
While most investors may be familiar with companies like Meta Platforms (META) and Roblox (RBLX), a metaverse-linked stock index can help investors access a similarly-themed basket of stocks through an ETF. indexed. If the Metaverse is the next iteration of the internet (which has grown tremendously since its inception), it’s worth following this industry in its infancy and capitalizing on growth opportunities. Estimates predict that the metaverse economy could grow from $500 billion in 2020 to $800 billion in 2024.(3) Much like the streaming and gaming sector, which shares some overlap, there are changes that support the way consumers digest entertainment and information (find out more here).
What’s in a metaverse index?
The Alerian Galaxy Immersive Digital Worlds Index (DWRLD) is an index of stocks committed to the development of immersive digital ecosystems. The index divides the Metaverse into three main business segments, which are described in more detail below.
What does the Metaverse have to do with crypto?
Platforms like Decentraland run on the Ethereum blockchain. Decentraland is made up of tracts of virtual space called LAND which are NFTs maintained by Ethereum smart contracts and purchased by cryptocurrency tokens called MANA.(4) However, other virtual worlds may not run on the blockchain . For example, Roblox, Minecraft, and other mainstream video games run on their own platform. Avatars and currency are unique to the individual game and not decentralized. Although users can build their own land, they do not own full rights to their assets as they do on blockchain-based platforms.
What overlaps does the metaverse have with other subsectors?
The metaverse as it stands today most closely relates to the gaming sector with some overlap with blockchain and broader technology sectors. But DWRLD is a separate index to both the S-Network Streaming & Gaming Index (STREAM) and the Alerian Galaxy Global Blockchain Equity, Trusts and ETPs (BCHAIN) Index. As of July 22, DWRLD had performance more similar to STREAM, but holds a larger weight in the information technology sector and less weight in the consumer discretionary sector. Compared to BCHAIN, DWRLD has less broad sector diversification and focuses more on internet-related sectors. DWRLD includes large cap stocks like Meta Platforms (META), Amazon (AMZN), Apple (AAPL) and Alphabet (GOOGL), popular gaming stocks like Roblox (RBLX), Activision Blizzard (ATVI) and Electronic Arts (EA ), and social media stocks like Twitter (TWTR) and Snapchat (SNAP).
