Cryptocurrency has had a difficult time recently. The enigmatic digital currency used by investors, gamers, and initial metaverse users to purchase NFTs (non-fungible tokens), avatar skins in games like Roblox, and other collector goods has just dropped from record highs. However, although the value of the primary method for making payments in the Metaverse and carrying out virtual deals has greatly fluctuated, many firms are still achieving significant progress in establishing themselves in the virtual world.
Bitcoin, the flagship crypto asset, made news when its price fell below $20,000, a level not seen since December 2020. This is far lower than its high in November when bitcoin prices approached $65,000. After the Federal Reserve boosted interest rates in June to combat skyrocketing inflation, overall prices in the cryptocurrency market experienced a significant decline.
The collapse of the cryptocurrency exchange site FTX has sent shockwaves throughout the Metaverse. The cryptocurrency exchange was formerly seen as a reliable and reputable leader in a sometimes volatile and uncontrolled sector. Many are curious about how the Metaverse would be affected by its collapse.
“Though I am not an investment professional, it’s fairly clear that while the ‘crypto crash’ makes for sensational headlines, it’s not unique to the broader assets market. With a recession looming, it would make sense for investors to seek safer returns. The positive side of this is that it has removed noise from the system and allowed those buildings to do so with less distraction in the market.”
Brian Trunzo, Metaverse lead at web3 developer Polygon Studios
While this period for FTX will undoubtedly stand out as a learning experience for crypto, Metaverse, and Web3 organizations and initiatives, it’ll also be recognized as a tremendous opportunity that some saw for what it was, and others simply overlooked. It’s critical to acknowledge that this is a perfect moment to think about what’s possible in the Metaverse and how you can effectively use it through your brand. The Metaverse would expand our everyday lives.
Why is Cryptocurrency crashing?
Although crypto collapses are nothing new in digital assets, there have been significant changes in Bitcoin’s price swings. What used to be crypto-specific events driving price swings are now macro issues with a comparable impact on global financial markets.
The Failure of FTX
The most recent disagreement between FTX and Binance has undoubtedly driven crypto prices downward. One of the main cryptocurrency exchanges, FTX, has nearly gone bankrupt. The FTX crisis has impacted the whole market, including major currencies like Bitcoin, which has dropped more than 70% since November 6.
Higher interest rates
Rising interest rates have been the primary cause of this year’s crypto meltdown, as well as the reason for BTC’s recent decline. Since the epidemic, the United States and other regions of the world have seen unprecedented inflation, resulting in price increases. As a result, several central banks, including the US Federal Reserve, have raised interest rates to reduce inflation by limiting the amount of money in circulation. One of the causes for the steady slide in BTC values is undoubtedly the high-interest rates that have ruled the crypto market this year.
Celsius Network
Celsius Network, a Decentralized Finance company, declared that it is blocking all cryptocurrency transactions due to “extreme market conditions.” Following the closure, there was a massive sell-off in which all cryptos plummeted.
“We are taking this essential measure… to stabilise cash and operations while we conserve and protect assets,” the firm stated in a blog post. “Furthermore, clients will continue to collect awards throughout the break of our commitment to our customers.”
The Terra Luna crash
Another cause for BTC’s drop in the crypto market is the decoupling of the TerraUSD stablecoin from the US dollar, which has resulted in the devaluation of the Luna cryptocurrency. In mid-2022, LUNA dropped almost 95% in a single day, causing numerous cryptocurrencies to suffer and continue to fall in price.
There aren’t any assurances in investing. Bitcoin has the potential to rise and fall at the same rate. A variety of issues concerning cryptocurrencies are hurting their prospects:
- Cryptocurrency exchanges fail
- Repression in nations such as China
- Global calls for increased regulation
- Concerns about the environment
- Security flaws and hacking
- Their value is entirely speculative.
“The downturn in crypto prices is a confluence of many factors: lack of liquidity, inflation, raising interest rates and the downturn of all financial markets more generally,”
Brian Trunzo, Metaverse lead at web3 developer Polygon Studios
What’s Next for The Metaverse after Crypto Crash?
Seize the opportunity
The Metaverse is still in its early stages. As fascinating as today’s VR and AR experiences are, they are simply the beginning of what’s to come. In a recent survey, 54% of experts believe the Metaverse would be a sophisticated and immersive component of daily life for a half billion or more people worldwide by 2040. This would represent a cultural revolution comparable to the birth of the internet.
As the Metaverse evolves, AR and VR experiences will be able to reach and serve customers more effectively than present technology. These new technologies will become a more critical aspect of our life, allowing users to buy virtual and actual items, travel, and even get healthcare.
It’s feasible that people would spend less money on metaverse contexts in the post-FTX era due to the difficulties FTX caused many crypto owners. This is similar to the impacts of an economic slump, which is temporary. There will be a widespread impact, but it won’t endure forever, and this temporary setback should not blur our vision of what the Metaverse will become. Now is the moment to establish yourself in the Metaverse. This technology will play a significant role in the future, providing unique options to develop your brand and communicate with people. Our lives are increasingly taking place in various online and offline environments. Don’t allow fear to keep you from gaining a footing in this critical area.
Be genuine in the Metaverse
Many people were taken aback by the demise of FTX due to the lack of transparency on many levels. The absence of detail gives the impression that something happened out of nowhere. A key takeaway here is that transparency is critical to the success of CEOs in the metaverse and crypto worlds. They also require that things be conveyed to them in a way they can comprehend. The Metaverse opens up new avenues for connecting with consumers and clients. This Metaverse, like social media, combines social connection and business so that people may engage with your brand on a human-to-human basis. These relationships can provide value to both you and your consumers.
Because metaverse technology is so new, it’s tempting to become caught up in the spectacle of the Metaverse itself. Customers value quality, authenticity, and transparency in the virtual environment just as much as offline. These elements should be fundamental to your brand since they will assist your clients in adjusting to the new reality of the Metaverse. Now is the ideal time to restart. Clarity implies being open and truthful with customers and clients regarding the company’s processes and ideals. This is an excellent opportunity to demonstrate how things function behind the scenes. 58% of Americans believe they don’t comprehend the Metaverse or NFTs; you may be the one to help them navigate this new reality.
Regarding the Metaverse, be straightforward, concise, and entertaining. Be unorthodox while talking about crypto, NFTs, and the Metaverse. Make a point of emphasizing user experience and getting people enthused about what you’re doing in the Metaverse. Make sure you don’t go too technical; show users and clients that these environments can be enjoyable and easy to use.
It’ll take time to regain trust
Crypto is crucial to several metaverse platforms’ financial functioning, so the fall of FTX will almost certainly affect the Metaverse economically. These effects, however, would not stay permanently; economic recovery will take time. That’s the last we’ll experience in the Metaverse.
It will take time to regain investor faith. The days of venturing investors viewing the Metaverse as a get-rich-quick scheme are likely past. Investors will be increasingly selective and cautious about the NFT, crypto, and metaverse-based firms and products in which they invest. Clarity will be required to reestablish trust. Authentic, transparent, and clear branding will appeal to investors who are skeptical about the Metaverse. Investors will want to take advantage of the current cheaper investment pricing in the Metaverse. The chance exists; all you have to do is be willing and able to bridge the trust gap.
Cryptocurrency got its beginnings in the aftermath of the financial crisis of 2009. It stems from people’s demand for decentralization, transparency, and trust. Crypto is inherently adaptive and continues to expand. Recovery is already underway. Remember where Cryptocurrency comes from and what it is used for. Maintain your calm, emphasize clarity, and your connection will strengthen.
Despite the continuous decrease in the price of cryptocurrencies, numerous brands engaged in web3 and the Metaverse are not slowing down. It appears like every company is making — or planning to make — the jump into the domain of virtual products these days.
This was most recently seen at Salvatore Ferragamo’s new SoHo shop, which debuted last month and is an excellent example of physical-meets-digital web3 activations. The Italian luxury label has erected a unique NFT experience at its 63 Greene Street shop, where guests enter a booth to construct their NFT from a range of Shxpir-designed backgrounds.
Other notable pushes into the Metaverse and web3 include Nicholas Kirkwood’s prior work with White Rabbit for Decentraland’s first Metaverse Fashion Week. Other large shoe companies are also getting in on the game, as seen by Nike’s November takeover of RTFKT, a digital maker of virtual shoes, collectibles, and accessories. Adidas Originals produced their inaugural NFT collection, “Into the Metaverse,” the same month. NFT holders gained special access to Adidas Originals experiences and products, including virtual wearables for the blockchain-based game environment, The Sandbox, and other platforms, as well as exclusive physical merchandise.
Experts expect these releases to continue regardless of what happens in the cryptocurrency market. The “crypto crisis” may be beneficial to the Metaverse in the long term, according to Emily Wengert, managing director and global executive creative director of experience at Huge.
“The drop in crypto prices we are currently experiencing can reduce barriers to entry. For companies that aren’t virtual or web3 natives, metaverse activity is a rounding error in their revenue. It’s not about revenue generation; it’s about exploring a new space at the intersection of community and creation, which is still very key. If anything, a downturn associated with a broader recession might turn out speculators and leave space for ‘true believers,’ artists and innovators.”
Conclusion
Despite a drop in bitcoin values, the Metaverse is believed to benefit long-term from cryptocurrency crises. Its enthusiasm for the Metaverse, which increased as large corporations entered the business, has waned. Numerous causes, including a lack of liquidity, inflation, rising interest rates, the Terra Luna crash, and a general decline in all financial markets, have contributed to the decline in cryptocurrency values. Because crypto is essential to the financial transactions of several metaverse services, the collapse of FTX would almost certainly have a negative economic effect on the Metaverse. Despite the ongoing decline in cryptocurrency prices, many businesses active in web3 and the Metaverse continue to grow. These consequences, however, wouldn’t last forever; it will take time for the economy to recover.
Indeed, every corporation is making — or plans to make — the transition into virtual products these days. Regarding the Metaverse, be straightforward, concise, and entertaining. Be unorthodox while talking about crypto, NFTs, and the Metaverse.
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Frequently Asked Questions(FAQs)
- What’s the reason for the crypto crash?
Ans: There are many factors at play – lack of liquidity, inflation, raising interest rates, and the general downturn of all financial markets.
- What is the Metaverse?
Ans: The Metaverse is a concept that refers to a possible future where computer-mediated communication and simulation technologies allow for the creation of shared, virtual worlds.
- What will happen to the Metaverse in the aftermath of FTX’s collapse?
Ans: The fall of FTX will almost probably have an economic impact on the Metaverse because crypto is crucial to the financial functioning of several metaverse platforms.
