Key points to remember
- Leaving cryptocurrency and the metaverse entirely out of your portfolio could mean missing out on two of the biggest potential growth markets of a generation.
- An overview of the bitcoin escape kit from META, U, MSFT, RIOT, SQ, NVDA and Q.ai.
- Cryptocurrency and the metaverse are new and unproven markets, which means riskier in the short term but promising for long-term investors. For bulls, this would mean that these stocks could represent 5-10% of your portfolio.
The metaverse and cryptocurrency have seen major setbacks this year. The strengthening US dollar has hit the profit margins of tech companies in particular, as these companies tend to do a lot of international trade.
On top of that, public enthusiasm for the metaverse and crypto has waned in recent months as more and more people step away from their screens and back into the “real world”. The crypto market experienced a crash that disappointed the general public.
But these bumps in the market can make it a good time to buy low if you’re a believer. If the Metaverse becomes all that Mark Zuckerburg dreams of, buying prices in this market are significantly lower than they have been in years.
If crypto rebounds or ever goes mainstream, stocks of related companies are currently lower than they were since before the big crypto surge in late 2020 and early 2021.
If you’re buying into one of these long-term takeoff markets, here are some of the top stocks to watch.
Naturally, one of the first stocks that comes to mind when it comes to the metaverse is Meta (META). Facebook’s parent company has invested heavily in its rebranding and is focusing on virtual reality. If Zuckerburg’s judgment is trustworthy and the metaverse takes off, you’ll be hard pressed to find another company that invests so much in becoming the platform of choice for consumers.
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 diverse enough to take the hit.
The stock plunged in February 2022 after Apple implemented new privacy measures for iOS users. These changes have made it harder for advertisers to dive deep into consumer demographics, which is the main reason advertisers are drawn 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 come up with an understandable strategy in response. If the company can pivot and improve its revenue streams, now may be the time for long-time investors to consider buying stocks.
The consumer market is not the only metaverse market. The US military is also getting into augmented reality and has hired Microsoft to make Hololens headsets. Microsoft also has an operating system called Mesh – think Windows 10 for XR. With military contracts and one of the leading XR operating systems, Microsoft cannot be ignored as a potential investment option in the metaverse.
Microsoft saw stock prices fall after a rally that lasted nearly two years. Helped by the pandemic, much of MSFT’s sustained rally was due to many companies running their operations remotely, increasing the need for cloud services.
However, the strength of the U.S. dollar threatened Microsoft’s projected earnings this year, and its Hololens was on shaky ground at the start of 2022, putting its military contract in question. Although they have since recovered and brought the product up to expectations, the temporary question mark was one of several factors behind the decline in investor confidence.
While it is true that MSFT is down from this time last year, it is still up from pre-pandemic numbers. At the end of December 2019, the stock was only trading at $158.96. Compare that to the current price of $256.06 at the start of September 2022, and you can see the company is still in a relatively good position 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 should gain even more as its framework is compatible with 3D programming. It also helps app developers to deliver in-app ads.
Unity is another software company that has been affected by the strength of the US dollar. There have also been issues with the algorithm that provides its advertising services, which has led to further price cuts. At its November 2021 high, U was trading at $196.65. As of September 2022, its price is only $40.79. Since May 2022, it has been trading at a lower price than its initial September 2020 IPO price.
If Unity can correct its algorithm, it could be the perfect time to buy a huge company with a huge market share. If not, things could get worse from here.
Riot Blockchain Inc. is one of the largest Bitcoin miners in America. Cryptocurrency, like all other commodities, is a matter of supply and demand. If the demand for cryptocurrency were to experience a resurgence, mining operations would be integral to satisfying the demand.
Another thing that makes RIOT attractive to some investors is its effort to be “greener” than the competition as its operations are powered by renewable energy.
Unsurprisingly, RIOT shares were below $10 through December 2020. When the cryptocurrency frenzy started in late 2020 and early 2021, shares soared to $71.33. Today, prices stabilized at $6.33.
In America, cryptocurrency markets remain largely unregulated. This makes any associated investment riskier than your typical long-term, buy-and-hold stocks. But if crypto ever really does become a more mainstream and stable currency, you might see that investing in it pays off tremendously. However, it is essential to be able to withstand extreme risks and price fluctuations.
Square has rebranded itself, now going by the name Block Inc (SQ). It facilitates many online transactions and is making great strides in standardizing cryptocurrency transactions.
For example, Block allows users to directly transfer money, receive paychecks, and pay bills with cryptocurrency through Cash App, and it is taking steps to add this functionality to digital wallets in general. . It is also involved in mining operations.
If cryptocurrency becomes mainstream, 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 compared to other options like RIOT, as Block does not deal exclusively in cryptocurrency. It also deals with “real” currencies, so if the crypto market never returns, the company may still have the opportunity to pivot accordingly.
You can trace the 2020/2021 cryptocurrency surge in SQ stock prices. At its peak in February 2021, SQ was trading at $276.57. Before the pandemic, it was trading at $83.33. Today it sits at $66.33 in September 2022. While these are major swings, Block’s diverse business model is reflected in a much higher base price than many other crypto stocks. .
Beneath the consumer experience of the metaverse lie technologies such as chips made by Nvidia Corp. (NVDA). Nvidia chips are also heavily used by bitcoin mining operations.
Because the company is so intertwined with crypto mining and metaverse trends, it hasn’t had a great year. It started 2022 at $301.21 and stands at $136.47 as of September 4.
Several factors are contributing to the loss of revenue, and therefore stock value, including the crypto crash, a reduction in consumer demand for gaming systems, and an overall lull in enthusiasm for the metaverse.
Nvidia is well balanced, however, and has made up some of its losses with a new branch of its business dedicated to manufacturing electric vehicles. If we see an increase in interest in crypto or the metaverse going forward, Nvidia stock should rebound significantly if it can maintain its position as the leading maker of the underlying hardware.
Risk management in the cryptocurrency and metaverse markets
Cryptocurrency and the metaverse are new and unproven markets. This makes them riskier for long-term investors in comparison. However, excluding them from your portfolio altogether could mean missing out on two of the biggest potential growth markets of our generation, depending on how things turn out.
For this reason, you may want to take advantage of investment tools that can help you plan for the long term, while shorting these market segments in case things go south, like Q.ai. Bitcoin Escape Kit.
Download Q.ai today to access AI-powered investment strategies. When you deposit $100, we add an additional $100 to your account.