Crypto Metaverse Klaytn (KLAY -4.80%) was one of the most successful altcoins October, with a gain of more than 40%. Based on its recent surge and the pace of its current trajectory, Klaytn is on track to become one of the top 50 cryptos by market capitalization by the end of the year. It is currently trading at $0.24, giving it a market capitalization of over $700 million.
However, any metaverse crypto exchange for less than $1, regardless of market cap, will be a highly speculative investment. While Klaytn has been skyrocketing lately, it is still down nearly 95% from an all-time high of $4.38 in March 2021.
Given these mixed signals, let’s take a look at the pros and cons of this metaverse crypto to see if it deserves a place in your portfolio.
Although Klaytn may have very little name recognition for the casual crypto investor, one factor in its favor is that it has the backing of Kakao, a large South Korean internet conglomerate. This has led to a number of high profile partnerships and collaborations, including a central bank digital currency (CBDC) project with the Bank of Korea.
Klaytn also continues to attract top gaming and metaverse projects to its blockchain. In September, Klaytn even started offering “gas” (usage) fee discounts to incentivize companies using its blockchain to launch new gaming projects.
Klaytn has also taken steps recently to address its tokenomics, which refers to how a crypto is created, distributed, or withdrawn from circulation. For example, in October, Klaytn said it plans to cut block rewards for blockchain validators by a third, which will go a long way in reducing the rate of new Klaytn creation. This led to Klaytn’s price doubling in 24 hours.
Klaytn also announced a new crypto buyback program, designed to remove certain Klaytn from circulation. Purely in terms of supply and demand, these two moves should help drive Klaytn’s price higher in the short and long term.
The major downside, of course, is that the metaverse niche is notoriously fickle and volatile. People love to point out the billions of dollars that are still pouring into the metaverse, yet the results of all these new investments have been either disappointing or inconclusive.
Consider Metaplatforms (META -1.80%), the company formerly known as Facebook, which saw a metaverse-related business strategy implode this year. Or take the example of two popular metaverse cryptos, Decentralized (MANA 4.38%) and The sandbox (THE SAND 2.80%). Both of these cryptos are still trading under $1 despite a number of big-name celebrities establishing a presence in their metaverse worlds.
Making things more complex for Klaytn is the fact that it is difficult to perform proper due diligence on this crypto. This, in large part, is because Klaytn primarily focuses on the South Korean gaming and metaverse market and bills itself as “the dominant blockchain in Korea.”
Although Klaytn has released press releases detailing all of the South Korean “gaming titans” that have switched to its blockchain, it’s hard to put this into proper context unless you have extensive knowledge of the South Korean market. . Additionally, some of the largest US cryptocurrency exchanges still have not listed Klaytn for trading.
Is Klaytn a buy?
The decision to buy any metaverse crypto is based on your faith in the long-term development of that market niche. This is why many investors are hesitant to pull the trigger on any Metaverse buy right now, including even the highest quality names. If you take a closer look at Meta’s recent earnings announcements, for example, there is reason to be concerned about the short to medium term outlook for the Metaverse. Everyone seems to be looking for the right strategy that will appeal to users, developers, and investors.
So, while Klaytn may be an interesting crypto metaverse to watch due to its recent performance, it is too early to give it a buy recommendation.
Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Dominique Basulto has no position in the stocks mentioned. The Motley Fool holds positions and endorses Meta Platforms, Inc. The Motley Fool has a disclosure policy.