Ornella Hernandez

<div id="highlights-block_62c895042670d" class="highlights">
 <ul>
 <li>Yuga Labs’ Otherdeed for Otherside leads all-time cumulative virtual land sales, in total worth $853 million</li>
 <li>As the metaverse grows, so does the virtual real estate market</li>
 </ul>
 
</div>



The key to sustainability of the metaverse may lie in the virtual real estate market, suggests Chainalysis.



The blockchain analyst’s latest State of Web3 report <a href="https://blog.chainalysis.com/reports/metaverse-gaming-web3/" target="_blank" rel="noreferrer noopener">found</a> the growth of blockchain-based virtual real estate (VRE) prices has outpaced physical real estate. VRE prices exploded 879% from September 2019 to March 2022, while real-world real estate prices grew by 39% during the same time period.



Of course, virtual and physical real estate are not the same thing. Humans need land, homes and buildings to live, work, study and sleep. Metaverse real estate, on the other hand, is all about retail, recreation and social activities.&nbsp;



According to Chainalysis economist Ethan McMahon, any correlation between physical and virtual real estate markets could be attributed to their relative maturities: Virtual real estate is only a couple of years old, so it has much more volatility than its more mature counterpart.



One of the main drivers of NFT land demand the report cites is access to private events and token-gated communities. Demand directly translates to sales of virtual real estate.&nbsp;



Bored Ape Yacht Club, for example, which has been a leader in bundling its NFTs with socialization entertainment for its community members, raised $320 million worth of ether from its Otherdeed land sales for its upcoming Otherside metaverse during the first weekend. It was “the largest NFT mint in history by several multiples,” according to Yuga Labs, with sales traffic <a href="https://cms.blockworks.co/solana-and-ethereum-suffer-weekend-disruptions-thanks-to-nft-mints/" target="_blank" rel="noreferrer noopener">triggering</a> skyhigh gas fees on the Ethereum mainnet.&nbsp;



Otherdeed for Otherside has the largest total cumulative value of land sales in metaverse real estate, coming in at roughly $853.6 million at the time of publication, <a href="https://dune.com/metaland/Metaverse-Land-Community" target="_blank" rel="noreferrer noopener">according</a> to Dune Analytics. Decentraland ranks second with about $378.6 million, and The Sandbox ranks third with $227 million in cumulative sales value. &nbsp;



A growing number of major companies are buying up metaverse land and setting up shop, including Adidas, Burberry, Gucci, Nike, Samsung and Louis Vuitton. JPMorgan was the first bank to <a href="https://cms.blockworks.co/jpmorgan-enters-the-metaverse-with-virtual-decentraland-lounge/" target="_blank" rel="noreferrer noopener">jump</a> into Decentraland by signing a year-long property lease in February, and HSBC <a href="https://cms.blockworks.co/hsbc-buys-virtual-real-estate-in-sandbox-metaverse/" target="_blank" rel="noreferrer noopener">followed</a> with a plot purchased one month later.&nbsp;



At the time, JPMorgan <a href="https://www.jpmorgan.com/content/dam/jpm/treasury-services/documents/opportunities-in-the-metaverse.pdf" target="_blank" rel="noreferrer noopener">released</a> a report that envisioned opportunities within the metaverse market worth over $1 trillion in yearly revenues by 2030.&nbsp;



<h3 class="wp-block-heading">Real-world trends map to metaverse markets</h3>



McMahon told Blockworks there is “massive” potential in this space, not only for game developers, but for individuals who own characters and items they play with as well.&nbsp;



Marketers and corporations that want to appeal to gamers could also benefit, with an ever-changing set of advertisement possibilities.



Brands seem unwilling to risk getting left behind. The largest VRE sale to date was made by financial publishing company Curzio Research, <a href="https://medium.com/@TCG_World/tcg-world-announces-5-000-000-purchase-in-commercial-real-estate-with-new-partners-curzio-research-dd49c62c7adf" target="_blank" rel="noreferrer noopener">spending</a> $5 million for a tract of virtual land in May in the TCG World metaverse running on the Binance Smart Chain (BSC). In the second-largest deal, Republic Realm <a href="https://markets.businessinsider.com/news/currencies/metaverse-property-sandbox-virtual-real-estate-deal-record-4-million-2021-11" target="_blank" rel="noreferrer noopener">paid</a> $4.3 million for a slice of The Sandbox.&nbsp;



Large sales in a particular area consequently affects prices of surrounding land, both in the physical and digital world. As a result, speculators may take advantage of short-term profit making. But speculation can only drive the value of digital property while scarcity and liquidity reign.&nbsp;&nbsp;&nbsp;&nbsp;



The main driver of value in the metaverse will be utility, which is currently the “missing layer for most metaverse platforms,” Sam Huber, CEO of metaverse development studio LandVault, told Blockworks.



Utility is directly related to business models that landowners can create on top of their land, he explained. From selling NFTs as tickets to events to e-commerce and advertising — any potential revenue generated gives metaverse land value.



While blockchain-based virtual real estate is relatively new, the concept of digital property is not. Be it video games Second Life, Fortnite, Roblox or Minecraft, virtual worlds have already successfully popularized metaverse assets and resources.&nbsp;



“Speculation will always exist, but eventually utility will take over as more and more people enter the metaverse, and it makes more sense to own land and build a business on it,” Huber said.



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Metaverse Land Prices Holding Up in Current Market Climate

<div id="highlights-block_627d8f8a052a5" class="highlights">
 <ul>
 <li>With lower ETH prices, floor prices of blue-chip NFT collections are going down</li>
 <li>NFT trading volumes have also dropped to their lowest monthly levels</li>
 </ul>
 
</div>



The current cryptocurrency downtrend has prices plunging across the board — and with the value of crypto falling, NFTs in dollar terms have also seen declines over the past few weeks.&nbsp;



Ether, the leader of the NFT market, is trading around $2,000 at the time of publication, down from $2,800 a week ago. Terra’s stablecoin, TerraUSD (UST), and its native token, LUNA, collapsed in recent days, losing more than 99%. 



While UST de-pegged from its one-to-one tandem with the US dollar and is trading at $0.13, LUNA hovered around $0.0000914 Friday afternoon.



NFTs built on Terra, meanwhile, marked <a href="https://cms.blockworks.co/terra-nft-market-sees-trading-spike-amid-ust-collapse/" target="_blank" rel="noreferrer noopener">record levels of trading</a> activity on May 11 that have since declined.



Ether’s lower prices, on the other hand, have caused a lingering drop in ETH NFT floor prices, along with lower gas fees (which power transactions on the Ethereum blockchain).



Blue-chip projects, such as Bored Ape Yacht Club (BAYC) and CryptoPunks, have been no exception. BAYC trading on OpenSea fell to its lowest point in the past month, down 63% on May 12 over a seven-day period.&nbsp;



While the range of daily sales has fluctuated between eight and 67 NFTs on any given day since the beginning of May, the collection&#8217;s floor price has taken a more consistent hit.



It dropped to 89 ETH ($169,792) on May 12 and went back up to 99 ETH Friday as markets showed signs of stabilizing. BAYC’s floor price peaked at 152 ETH and nearly crashed the Ethereum network on the eve of the debut of Yuga Labs’ Otherdeed for Otherside collection in early May.&nbsp;



Otherdeed NFTs — required to purchase land in the Otherside metaverse — remain in the top 10 collections with the highest trading volume since its debut on OpenSea. It ranks alongside its parent company’s other collections like BAYC and Mutant Ape Yacht Club in that respect.



Otherdeed for Otherside’s transactions have declined precipitously since launch, from $375 million in volume to $6.5 million, <a href="https://nftgo.io/collection/otherdeed/overview" target="_blank" rel="noreferrer noopener">according</a> to NFTGo. Even so, the collection has recorded some of the highest priced NFTs this week, <a href="https://nonfungible.com/" target="_blank" rel="noreferrer noopener">according</a> to NonFungible.com.&nbsp;



Otherdeed for Otherside #59906 sold for 625 ETH, equivalent to $1.6 million.



Other NFT collections that continue to lead the charts this past week include Art Blocks, Doodles and Moonbirds — the Azuki Beanz collection also saw big numbers, even after its founder revealed he was <a href="https://cms.blockworks.co/trading-volumes-spike-on-azuki-nfts-after-creator-admits-to-failed-projects/" target="_blank" rel="noreferrer noopener">part of three previously failed NFT projects</a>.



Market conditions have also prompted some NFT investors to try to liquidate their holdings amid considerable losses.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">👀 0x8629..2b0a ↘️ fumbled ↘️ BAYC #8585<a href="https://t.co/SCfskLhyfu">https://t.co/SCfskLhyfu</a> 🏆 status: No Hands 🛒 in: 696.97 WETH 💰 out: 142 WETH 😬 hodl: 6 months 20 days Ξ loss: -554.97 ETH ❌ 💲spent: $2,610,153 (10/2021) 💲lost: -$2,277,731 (📉 -87%) <a href="https://t.co/8DvXv1HJeI">pic.twitter.com/8DvXv1HJeI</a>&mdash; Flip McBot (@nftsalesbot) <a href="https://twitter.com/nftsalesbot/status/1524497113228402688?ref_src=twsrc%5Etfw">May 11, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



In other NFT news, <a href="https://cms.blockworks.co/meta-trials-nft-display-feature-for-instagram-creators-and-collectors/" target="_blank" rel="noreferrer noopener">Meta began testing an NFT display feature</a> for a select group of Instagram creators and collectors earlier this week. Once the function becomes publicly available, it could potentially affect the greater NFT market.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.