Metaverse Index Monthly Update - November 2021
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NFTfi allows borrowers to put up assets for a loan and lenders to make offers in exchange for interest. The NFT is held in escrow so lenders know for sure that they will either get their money back with interest, or receive the NFT in exchange.
Facebook’s name change and pivot to being a Metaverse company at the end of October sparked a wildfire. After $19m of trading volume in the last three days of October, Metaverse Index broke all kinds of records in November. We saw mind-bending numbers across new holders, price action, trading volumes and other metrics. This pace of acceleration, while exciting, doesn’t strike us as sustainable, so we wouldn’t be surprised to see some short-term turbulence after a 14x peak-to-trough performance for MVI.
Looking at the numbers, MVI was up 52.2% in November, outperforming both BTC and ETH, which were down 7.3% and up 8%, respectively. Since its inception in April, MVI returned 228.1% compared to -1.8% for BTC and 119.2% for ETH.
The ability of MVI to outperform ETH over the last eight months is, in our view, a testament to the strong narrative around the Metaverse. The concept of the Metaverse easily captures the imagination of most people as well as corporations. Metaverse is highly memeable. Further, it has enormous long-term potential, both economic and societal. While it’s impossible to predict the short-term price swings, we firmly believe that the Metaverse is here to stay, powered by blockchain and NFT technology.
Going for a deep dive
Risk metrics remain essentially unchanged, while net capture ratios continued to improve through November. MVI’s correlation to ETH and BTC stood at 0.73 and 0.66 since inception. The same can be said about MVI’s beta to both, currently at 1.05 for ETH and 1.28 for BTC.
Net capture ratios continued to improve this month as MVI outperformed. As a quick refresher, upside capture indicates, on average, how much of a token’s upside does MVI capture, the same story on the downside. Net capture is the difference between upside capture and downside capture. For BTC, net capture increased by 12% to 47.6%, while for ETH, this is the first time we are seeing a positive net capture ratio, at 8.7% as of the end of October.
The growth in the number of unique addresses holding MVI exploded in November, up 67%. We added 3,245 holders to the MVI family, with a total of 8,098 holders on Ethereum and another 1,675 addresses holding MVI on Polygon.
Here’s another chart to put things into some context.
We saw considerable growth in holders with under 10 units (less than $3,500) and those holding between 10 and 49 units (between $3,500 and $17,000). These two cohorts went from roughly 21% of AUM to 29.3% over the course of November. The 10-49 cohort actually overtook both 250-749 and 750+ cohorts in terms of the share of the AUM.
While holder growth was explosive, unit growth lagged somewhat in absolute terms with an 11% growth in units, reaching 200,000 in November. While the top-line growth rate was slightly muted, it masks the fact that the unit price is up 1100% from the bottom in June and 223% over the last two months. When adjusted for unit price, the November cohort is by far the largest cohort by AUM.
We also wanted to highlight the trading volume, both absolute and relative. From October 29th, the date after Facebook’s announcement, and to November 30th, MVI traded $94.5 million of volume on somewhere around $5.5 to $6.5 million of liquidity. That’s pretty close to 20x turnover in one month. If that’s not mind-blowing enough, MVI traded $211 million since its inception on April 7th, which means that 45% of MVI’s lifetime trading volume happened after Facebook’s announcement.
There’s another interesting dynamic that, in our view, speaks to the broader narrative in crypto. We’ve seen DeFi underperform ETH for quite some time now, while the Metaverse narrative gained considerable traction. Performance aside, we saw this play out in trading volume as well. MVI traded $22.3 million more than DPI since October 29th despite DPI having 5x more liquidity.
Crypto has always been a land of narratives and memes, especially during bull markets. We’ve seen the DeFi narrative last summer and, perhaps, earlier this year. There were several cycles of NFT hype, alternative layer 1s narrative, the Metaverse narrative, and others. It’s reasonable to expect that the Metaverse narrative will or has already reached a crescendo. For the most part, valuations are stretched, and most projects don’t have a working product, making it relatively easy to push the prices based on hype vs reality. The space needs to mature and grow up a bit before catching the next wave. An interesting question now is, what is the next narrative? Could it be DAO tools & infrastructure, or the data economy, or social tokens? We don’t know, but we expect to find out soon enough.
Portfolio performance
At the portfolio level, most tokens in MVI were up in November, with NFTX and AXS as the two exceptions. AXS was pretty much flat, while NFTX was down 17.8%. The overall index performance was driven by SAND (332.5%), ILV (85.3%), MANA (61.6%) and WAXE (76.3%), all relatively large positions in MVI. REVV and TVK also deserve an honourable mention, despite less significant contribution to MVI performance due to small position sizing.
SAND was a standout performer in November, up 332% following a 134% rally in October. Pre-Facebook announcement, SAND was undervalued relative to other projects in the space, like Illuvium, Axie, YGG, etc., with FDV of about $2bn. It’s no surprise that the token has since caught fire. There were some project-specific catalysts in November too. The company raised a $93 million Series B round led by Softbank, no less. The team reiterated their roadmap, targeting player-based governance in Q2 2022 and platform expansion + community tokens in Q4 2022.
Now for the big news – Sandbox has finally released its Alpha which went live on November 29th. Alpha consists of 18 experiences available to those who hold the Alpha Pass, and 3 of which are open to everyone. There’s a total of 5,000 Alpha Passes, with 1,000 available through raffles for landowners and 4,000 through daily social contests. We can’t wait to try it out and report back.
As far as honourable mentions go, Terra Virtua and WAX have both been pushing the play-to-earn (P2E) narrative recently, which was reflected in their token prices.
In November, WAX was up nearly 50% after announcing a partnership with Metasaurs to co-found a new gaming studio, MetaGames. They will be bringing the Metasaurs game and its P2E dynamics onto the WAX blockchain as part of this linkup. Not content with just the Metasaurs news, WAX will also host Blockchain Brawlers NFTs and will have a bridge between Binance and WAX in future, allowing players to move their assets across for this P2E game.
TVK, meanwhile, have been teasing V1 of their virtual reality hub, which has portals to other virtual environments and games that use P2E in their design. The $TVK token rose 78% over the last month, and the chart looks strong. Rather than an explosive pop during the Metaverse hype, TVK has seen consistent growth with their steady release of new partnerships and virtual world upgrades.
During November, Terra Virtua also partnered with the Indian Super League, India’s largest football league, with a viewership of 168m in 2020. The partnership is for a series of collectible animated trading cards, plus match highlights (like NBA Topshot) and, of course, team-specific Vflects. It’s interesting because it’s a great example of NFTs onboarding a broader audience to the crypto ecosystem, giving fans another way to express their support of the team and their chosen sport more generally.
Closing Thoughts
In November, we wrote an in-depth piece looking into Yield Guild Games and continued to go through Matthew Ball’s “Metaverse Primer”, covering hardware, networking and compute. We also recorded the first episode of our “Probably Nothing” podcast, a more informal and off the cuff Metaverse podcast.
Last but not least, there are no inclusions or removals for this month’s rebalance. We continue to monitor the space, and many interesting projects qualify for inclusion. However, liquidity is a challenge, and the rebalancing economics are forcing us to increase the liquidity threshold for inclusions. Despite that, we hope to add some exciting tokens to MVI in the foreseeable future.