Metaverse coins have been under pressure in the past few weeks after their spectacular rally ended. The Decentraland price is trading at $3, which is about 50% below the highest level in 2021. Its total market capitalization has dropped to about $4.3 billion.
Similarly, The Sandbox price has dropped to $4.7, which is about 43% below the highest level in 2021 while its total market cap has declined to $5.3 billion. This decline is likely because there are concerns about whether digital real estate will continue doing well in a high interest rate environment.
Virtual property doing well
A major theme in the decentralized industry is on the metaverse. Indeed, some of the biggest companies have announced plans to launch their metaverse projects. Facebook has even changed its name to Meta Platforms because of the industry.
Nvidia has launched its omniverse projects while Microsoft has announced plans to integrate the metaverse into its Microsoft Teams projects.
The latest company to announce its entry into the metaverse industry is Walmart. In a statement on Sunday, the company said that it will launch its metaverse projects and even a cryptocurrency.
In the blockchain industry, Decentraland and The Sandbox have emerged to be the biggest metaverse projects with a combined market value of over $10 billion.
One of their leading projects is virtual land. In 2020, it was announced that a company had acquired a virtual property for $4.3 million in The Sandbox network. In the same period, another buyer acquired a virtual property for over $2 million in the Decentraland ecosystem. A quick look at these networks shows that properties are being listed for thousands of dollars.
Key risk emerges
While virtual property is doing well, analysts believe that there is a major risk ahead. For one, many central banks are set to start hiking interest rates this year. Indeed, some, like the Bank of England (BOE) and the Reserve Bank of New Zealand (RBNZ) have started hiking interest rates.
The Federal Reserve, in its part, has hinted that it will end its expansive quantitative easing (QE) program in March. Most importantly, officials have warned that it will implement about 3 to four rate hikes in a bid to lower inflation.
A hawkish Fed poses a major risk for virtual property being sold in Decentraland and The Sandbox. Historically, real estate and other properties tend to struggle when the Fed is hawkish. This is probably the reason why the MANA and SAND prices have struggled in the past few months.
