- Leaving cryptocurrency and the metaverse out of your portfolio entirely could mean missing out on two of the largest potential growth markets of a generation.
- A snapshot look at META, U, MSFT, RIOT, SQ, NVDA and Q.ai’s bitcoin breakout kit.
- Cryptocurrency and the metaverse are new and unproven markets, meaning riskier in the short-term but promising for long-term investors. For the bullish, that would mean these stocks could make up 5-10% of your portfolio.
Both the metaverse and cryptocurrency have seen major setbacks this year. The strengthening U.S. dollar has hit the profit margins of tech companies particularly hard, as these companies tend to do a lot of international business.
On top of this, public enthusiasm for the metaverse and crypto has waned in recent months, as more people step away from their screens and back into the ‘real world.’ The crypto market experienced a crash that disillusioned the public at large.
But these hits to the market may make this a good time to buy low if you’re a believer. If the metaverse becomes everything Mark Zuckerburg dreams it will be, prices for buying into this market are notably lower than they have been in years.
If crypto rebounds or ever becomes mainstream, stocks in related companies are currently lower than they have been since before the big crypto surge in late 2020 and early 2021.
If you buy into either of these markets taking off over the long-term, here are some of the top stocks to watch.
Naturally, one of the first stocks one thinks of when it comes to the metaverse is Meta (META). Facebook’s parent company has invested a good deal in its rebrand and focus on VR. If Zuckerburg’s judgment can be trusted and the metaverse does take off, you’ll be hard-pressed to find another company that’s so heavily invested in becoming the consumer platform of choice.
In the short-term, however, Meta’s Reality Labs lost $10.2 billion in 2021 and $5.8 billion in the first half of 2022. It’s important to remember that Meta isn’t just Facebook’s version of the metaverse – it also includes Facebook itself, Instagram, and Whatsapp. Even if VR never takes off, the company is diversified enough that it may be able to take the blow.
The stock took a nosedive in February 2022 after Apple implemented new user privacy measures for iOS users. These changes made it harder for advertisers to dive deep into consumer demographics, which is the primary reason advertisers are attracted to Facebook’s platform.
The change is estimated to cost the company $10 billion in revenue this year alone. META has yet to recover and put forth a comprehensible strategy in response. If the company can pivot and mend its revenue streams, this may be a good time for long-time investors to consider buying shares.
The consumer market isn’t the only metaverse market. The U.S. military is getting in on AR, too, and they’ve contracted Microsoft to make them Hololens headsets. Microsoft also has an OS called Mesh – think Windows 10 for XR. With military contracts and one of the leading XR operating systems, Microsoft can’t be ignored as a potential metaverse investment option.
Microsoft has seen share prices dip after a rally that lasted nearly two years. Aided by the pandemic, much of the sustained MSFT rally was due to so many companies running their operations remotely, increasing the need for cloud services.
However, the strong U.S. dollar has threatened Microsoft’s projected profits this year, and its Hololens was on shaky ground in early 2022, putting its military contract in question. While they have since recovered and brought the product up to expectations, the temporary question mark was one of the many factors that caused the slide in investor confidence.
While it’s true that MSFT is down compared to this time last year, it’s still up compared to pre-pandemic numbers. At the end of December 2019, the stock was only trading for $158.96. Compare that to the current ‘slump’ price of $256.06 in early September 2022, and you can see that the company is still in relatively good standing in the eyes of investors.
Unity (U) creates software that allows developers to build apps. In 2021 there were 5 billion downloads of apps built using Unity software. As the metaverse grows, Unity stands to rake in even more as its framework is compatible with 3D programming. It also helps app developers run in-app ads.
Unity is another software company that was hit by the strong U.S. dollar. There have also been issues with the algorithm that provides its ad services, which have led to further pricing drops. At its November 2021 peak, U was trading for $196.65. In September of 2022, its price is only $40.79. Since May of 2022, it has been trading lower than its initial IPO pricing from September 2020.
If Unity can fix its algorithm, this could be a great time to buy into a huge company with considerable market share. If it cannot, things might get worse from here.
Riot Blockchain Inc. is one of the largest Bitcoin miners in America. Cryptocurrency, like every other commodity, is all about supply and demand. Should demand for cryptocurrency see a resurgence, mining operations will be integral to meeting demand.
Another thing that makes RIOT attractive to certain investors is its effort to be more ‘green’ than the competition as its operations are powered by renewable energy.
Perhaps unsurprisingly, RIOT shares sat below $10 until December of 2020. When the cryptocurrency frenzy began at the end of 2020 and the beginning of 2021, shares skyrocketed to $71.33. Today, prices have settled back down to $6.33.
In America, cryptocurrency markets remain largely unregulated. That makes any associated investment riskier than your typical long-term, buy-and-hold stock. But if crypto ever truly becomes a more mainstream, stable currency, you could see investments in this arena have a huge payoff. Being able to stomach the extreme risks and pricing swings is a must, though.
Square has rebranded itself, now carrying the name Block Inc (SQ). It facilitates many online transactions, and is making big moves when it comes to normalizing cryptocurrency transactions.
For example, Block allows users to directly transfer money, receive paychecks and pay bills with cryptocurrency via Cash App, and it is making moves to add this functionality to digital wallets at large. It is also involved in mining operations.
If cryptocurrency becomes commonplace, Block is in a unique position to facilitate these transactions without consumers needing to knowingly interact with a third-party intermediary.
SQ is also a slightly safer investment over other options like RIOT, as Block doesn’t exclusively deal with cryptocurrency. It also deals with ‘real’ currencies, so if the crypto market never surges back, the company may still has room to pivot accordingly.
You can trace the 2020/2021 surge in cryptocurrency in SQ’s stock prices. At its height in February 2021, SQ was trading for $276.57. Prior to the pandemic, it was trading at $83.33. Today, it sits at $66.33 in September 2022. While these are some major fluctuations, Block’s diversified business model is reflected in a much higher base price than many other crypto stocks.
Beneath the consumer experience of the metaverse lies technology like the chips manufactured by Nvidia Corp. (NVDA). Nvidia chips are also heavily utilized by bitcoin mining operations.
Because the company is so closely tied to crypto mining and metaverse trends, it hasn’t had a great year. It started 2022 at $301.21, and is sitting at $136.47 as of Sept. 4.
There are several factors contributing to revenue loss, and therefore stock value, including the crypto crash, a reduction in consumer demand for gaming systems, and an overall lull in excitement over the metaverse.
Nvidia is well-rounded, though, and has been making up some of its losses with a new arm of its business dedicated to manufacturing electric vehicles. If we see a surge in interest in crypto or the metaverse in the future, Nvidia stock is likely to bounce back in a big way if it can maintain its position as the primary manufacturer of the underlying hardware.
Managing Risk in the Cryptocurrency and Metaverse Markets
Cryptocurrency and the metaverse are new and unproven markets. That makes them riskier for long-term investors by comparison. However, leaving them out of your portfolio entirely could mean missing out on two of the largest potential growth markets of our generation, depending on how things pan out.
For that reason, you might want to take advantage of investing tools that can help you plan for the long-term, while also shorting these market segments in case things go south, like Q.ai’s Bitcoin Breakout Kit.
Download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we’ll add an additional $100 to your account.