The land may be virtual, but the pain is real
A meltdown in the value of NFT lands from leading metaverse platforms Decentraland, Somnium Space, and The Sandbox is in full swing. Combined, the average sale price of lands in these three platforms is down by more than 91% since their respective highs.
When Facebook announced its rebrand to Meta on October 28, 2021, the world sat up and paid attention. More importantly, blockchain-based metaverse projects that had already established themselves started to feel the love as the world became interested in the opportunities metaverse and virtual world platforms delivered.
Amidst the hype, speculators dived to scoop up NFT land in leading platforms as expectations grew about the world, eventually living, working, and playing in the metaverse. From one perspective, the idea is solid because If millions of people end up on these platforms, they will need land. Similar to the real world.
However, the hype has been short-lived, and as people slowly stopped paying attention and speculating on land, the average price of NFT land in the leading platforms has decreased by as much as 95%. Of course, there is the important nuance of the falling value of Ether to consider.
The numbers backing the claim
A simple Tweet from @MacroAlf on Twitter led to this deeper dive into the state of metaverse land value. After throwing up a tweet claiming that metaverse lands were in meltdown – we had to go deeper.
Using data from the same platform from which the chart above was built, we looked at the average sale price in dollars of NFT lands on Decentraland, Somnium Space, and The Sandbox, respectively. Taking their highest and lowest average price in dollars over the last 12 months and calculating the percentage decrease.
- Last 12 months
- Highest Average Price – Jan 10, 2022 – $35,474
- Lowest Average Price – June 13, 2022 – $2,766
- % decrease in land value = 92.2%
Interestingly, NFT land sales in The Sandbox did see a peak in November 2021. At the same time, other collections were losing steam. However, The Sandbox was arguably the most active platform after that time, announcing several strong brand partnerships and also releasing a second season play-2-earn event.
These things seemingly helped The Sandbox maintain its hype and see its highest average sale prices in January 2022 before the entire crypto market began its proper slide into a bear market and prices started to collapse along with the value of Ether.
- Last 12 months
- Highest Average Price – Nov 29, 2021 – $37,238
- Lowest Average Price – May 23, 2022 – $4,379
- % decrease in land value = 88.2%
Looking at NFT sales in Decentraland over the last seven days shows more clearly what traders are willing to pay for land in Decentraland now. Outside a couple of high-value sales, we see many sales for between $4,000 and $6,000, which loosely aligns with the current average sale price of around $4,500.
Diving further into the wallet of the new owner of parcel -31,10 reveals that they only hold this Decentraland NFT land plot and no other NFTs. This is somebody who firmly believes that NFT lands in Decentraland will again see increasing demand and value.
- Last 12 months
- Highest Average Price – Nov 8, 2022 – $26,013
- Lowest Average Price – June 27, 2022 – $1,369
- % decrease in land value = 94.7%
Somnium Space, while not as high profile as the other two metaverse projects, is arguably one of the most advanced virtual worlds being built. The team has a solid vision to build out the closest resemblance to what is described in Ernest Clines best selling book Ready Player One.
A fully interoperable metaverse where users are in the same instance and have the freedom to do whatever they please. They have even gone so far as to release the Teslasuit, a full haptic body suit designed to let metaverse citizens experience touch, feel, and sensation in Somnium Space.
Diving into NFT land sales over the last seven days in Somnium Space confirms the drop in value from their all-time highs. We see several sales of medium plots between $5,000 and $3,000.
Diving further into the top sale in the last seven days for Medium plot#2026, we can see the trading history of that plot. The last time the plot changed hands was seven months ago when it sold for around $17,000, and five days a go that buyer sold it at a considerable loss for around $5,000.
Again, speculators that bought at the peak of the metaverse hype are looking to recover some funds rather than hold the land and wait for better days. Arguably this shows they either didn’t fully understand what they bought or dont know if Somnium Space has a future.
The end result of the analysis is that when combining the individual percentage decreases for each metaverse, we get an average decrease in the value of NFT land across the three metaverse platforms of 91.7% from their highest to the lowest average price.
It’s also important to look at the value of the currency used to trade these virtual lands as it will affect the dollar value. While we indicated dollar values above, these lands are predominantly bought and sold in Ether.
ETH worth less
The nuance is important because if, for example, a trader pays 4 ETH in November 2021 for a plot of land when ETH was valued at $4,000, then the cost to them was $16,000. If five months later, the value of ETH is $1000 and the plot is worth 4 ETH, the seller might get $4,000. Losing $12,000 in the process, or simply hold and wait for better days.
In that situation, sellers could adjust their price to 16 ETH and try to regain the total dollar value, but it’s not common for sellers to operate this way. Moreover, buyers expect NFT lands to increase in value as demand grows and supply shrinks under the simple rules of economics.
Over the last 12 months, ETH hit a high of $4,815 on November 9, 2021, and a low of $995 on June 19, 2022. That’s an almost 80% drop in value between those two dates. So the numbers look aligned unless sellers repriced their NFT lands in ETH to compensate for the dollar value loss over the last 12 months.
The lands were worth less in dollars as the value of Ether fell. However, that doesn’t explain everything. I.e., we’ve observed a 91% drop in NFT land value for the top three metaverse platforms, but at the same time, the value of the currency used to trade the lands has also taken a massive hit.
If people bought NFT land plots in any of the three metaverse platforms mentioned here when prices were at their highest, then the best action plan is arguably to hold. Wait for the value of ETH to increase and for some positivity to return to the space, and then start to think again.
It’s also important to understand that while a headline can say the values are down more than 90%, the holders of the NFTs are not technically down because they still hold land, which at one point had serious value and could do once again. Of course, if a person paid $17,000, now it’s worth $3,000, and the bad feelings are hard to shake. Patience is key.
However, it is more concerning that NFT land plots in the leading metaverse platforms have decreased in value in a short time and appear to have been influenced purely by speculation and hype. None of the three platforms did anything spectacular during that time, supporting the idea that excited investors rushed in and created a bubble.