- The metaverse saw its number of users dwindle in 2022.
- It will be a niche industry in the future.
- DeFi has a significant use-case following the collapse of FTX.
The blockchain industry went through a turbulent period in 2023 as recession and regulatory risks intersected with high interest rates. As a result, cryptocurrency prices slumped by more than 70%, leading to over $2 trillion in losses. In this period, key industries like Non-Fungible Tokens (NFTs), metaverse, and DeFi collapsed. Let us look at whether the DeFi and the metaverse sectors are dead.
DeFi TVL and metaverse volume crashed
At their peak, most analysts expected these industries to lead the world into the new era of web3. As a result, millions of people were using metaverse platforms like Decentraland and The Sandbox.
Similarly, millions of people were using Decentralized Finance (DeFi) platforms like Uniswap, PancakeSwap, and dYdX. In this period, the total value locked (TVL) in DeFi surged to over $250 billion, making it a major industry.
Recently, however, DeFi and the metaverse have all seen increased churn as the crypto industry collapsed. The TVL in DeFi protocols has plunged to about $60 billion while the number of metaverse users has dropped.
Decentraland has seen the number of members of its metaverse plunge to less than 1,000. Similarly, the number of Sandbox active users has dropped to less than 100k.
Similarly, tech companies that embraced the metaverse have had a major wake-up call. Meta Platform’s stock price collapsed by more than 50% in 2022 while companies like Nvidia and Unity Software tumbled.
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According to the WSJ, internal documents showed that Meta Platform’s metaverse was largely empty with about 200k members. Also, most members don’t return after using the platform for a month. So, is the metaverse and DeFi dead?
Are the metaverse and DeFi dead?
A closer look at the headline figures show that DeFi and the metaverse are not dead yet since they still have many users. The $60 billion locked in DeFi is not a small number for an industry that was started a few years ago.
DeFi could benefit from the collapse of FTX, Celsius, Voyager Digital, and BlockFi because of the level of transparency in the industry. While many CeFi companies collapsed, only a few DeFi platforms imploded.
Two of the biggest implosions were Anchor Protocol and Serum. Anchor collapsed after Terra USD lost its peg while Serum collapsed because of its relationship with FTX. Therefore, there is a likelihood that more people will embrace DeFi protocols like Uniswap and GMX. This is the same view I shared about DeFi a few months ago.
The metaverse is a different ball-game altogether. I suspect that the metavese will exist as a relatively niche product. It also has a long way to becoming a mainstream industry. Therefore, investing in metaverse tokens like Decentraland and Sandbox is relatively risky.
