Chen Li is the CEO and Founder of Youbi Capital, a digital asset VC and accelerator.
The digital economy is creating an entirely new kind of investor. From the embrace of blockchain to the emergence of cryptocurrency, decentralized finance and NFTs, today’s traders are operating within a landscape transformed.
This is finance like we’ve never seen it – and it’s just the beginning. Investors are evermore comfortable trading in internet culture with the line between memes and financial instruments increasingly blurred. For example, ‘meme’ cryptocurrencies like Dogecoin (DOGE) and ‘meme’ stocks like Gamestop have reached new heights over the past 12 months thanks to fervent support from Generation Z.
Now, with the development of the metaverse, internet culture is only going to become more tangible. The metaverse is set to combine blockchain technologies to create entirely new applications, like games with their own economies, and yield-bearing nonfungible assets, such as wearables or avatars. For digital native audiences, the metaverse will establish a new ecosystem where investing and trading in internet culture is the norm.
The financial power of memes
Generation Z shows a strong interest in being more financially literate than previous generations – though they’re operating under an entirely different set of rules than their parents and grandparents.
More than 80% of Gen Z (people born after 1996) rely on family for financial information, but due to the rapidly changing nature of the landscape, the advice of older generations is increasingly out-of-date.
Worse, it’s often inapplicable to market segments like cryptocurrency. According to recent data by Tallo, 38% of Gen Zers receive financial advice from TikTok, reporting they’re likely to turn to the platform to get advice on long and short term savings.
Over the past year, communities on social media have become invaluable sources of financial education for this demographic. This led to last year’s explosion of meme stock investments, like GameStop and AMC, as well as meme cryptocurrencies, like Dogecoin and Shiba Inu (SHIB).
A new report finds that enthusiasm for meme stocks remains steady for young investors, with their attention also shifting toward the metaverse.
The rise of the metaverse
An interface layer between the physical and the virtual, the metaverse is shaping up as another major vehicle to drive digital investments. Why? Because it provides the basis for new types of digital-first economies, the seeds of which we see with NFTs and their application across art, land and collectables.
A prime example is Bored Ape Yacht Club. The limited crypto art collection of “ape” NFTs has become a meme itself with the cheapest selling from USD 200,000. Part collectable and part community, owning one allows users to speculate on future value delivery by the franchise. In December, for example, Bored Ape Yacht Club partnered with Adidas to create wearable items for blockchain gaming.
Indeed, blockchain gaming offers another exciting glimpse of what’s to come in the metaverse.
These games are no longer just games, but rather decentralized digital economies sugarcoated in a digestible format. Most games have native tokens for in-game purchases and trading between players, deriving value through the use of their tokens which users and crypto traders deem valuable.
Play-to-earn (P2E) games like Axie Infinity and DeFi Kingdoms bring token-powered ecosystems to life and interconnect finance, work and social interaction. Users learn about concepts like decentralized exchanges and liquidity by gameplay and, as a result, invest in this emerging segment of the metaverse. We are already seeing incredible growth from these unique financial instruments with Axie Infinity growing to an estimated 10 million players, many of whom are non-crypto natives. Further, some players are leasing their NFTs for a cut of whatever cryptocurrency the renter earns while gaming, a model pioneered by Yield Guild Games, a P2E guild.
The metaverse is creating an online, parallel economic system. It’s global, transparent and counts blockchain at its core – and expect it to be embraced by an audience with an appetite for pushing digital boundaries.
Digital economies and the future
Younger people are trading in internet culture and leveraging digital financial instruments more than ever. Now, thanks to the metaverse and the applications that run in the metaverse, this trend is set to exponentially grow in the coming years. Truly, the sky is the limit in this new frontier – from virtual worlds where scarce ‘land’ can be purchased, traded and built on, to marketplaces that match the supply and demand of digital assets.
Of course, this isn’t to say the space is without risks. Memes come and memes go, so it is integral for blockchain projects to offer more than just hype.
Especially for collectables and gaming cryptoassets, there must be utility to encourage long-term adoption. This is where community leaders must start projects, build features and create worlds where the meme instrument is core to function.
These are early days and the number of verticals and their respective definitions will be subject to change as the metaverse evolves. However, for a generation in digital metamorphosis, there’s little doubt that new economies and investment opportunities are on the horizon.