Crypto Housing Crash Costs Digital Homeowners a Fortune

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Investors imagined that the rules of real estate in the physical world would apply to the virtual realm. Digital worlds were to become the new main streets, shopping malls and tourist attractions, making lucrative investments in high traffic areas.

Today, these virtual worlds are more like a wasteland. User numbers have plummeted and online searches for the metaverse have fallen to less than a fifth of their peak just over a year ago. The most popular worlds turned out not to be corporate sponsored spaces developed by crypto bros, but video games such as Roblox and Minecraft.

Investment in metaverse property plummeted to just $43 million in the last three months of last year, a 95% drop in six months.

The market slump in recent months has been partly explained by a drop in the value of cryptocurrencies used to buy and sell virtual properties, their value has fallen by about half in the last year. However, the fall in virtual land values ​​has been even more painful than the broader crypto market.

Dan Reitzik, chief executive of TerraZero, a metaverse developer, says the majority of purchases during the roaring months of the virtual property boom came from investors hoping digital earth would become the next bitcoin.

There was a lot of speculation at first, but it was speculation based purely on value appreciation, not what you could do with the technology, he says.

TerraZero itself has spent millions, both in cash and equity, to acquire hundreds of patches of metaverse land.

His Vancouver-based company made headlines when it sold what became the world’s first metaverse mortgage to a client who needed financing to buy land in Decentraland. After that, Reitzik says the company received thousands of loan applications to purchase virtual property.

They didn’t want to build anything, but they wanted leverage to acquire land, believing that its value would increase tremendously.

As a result, few landowners spent time developing their plots, leaving the metaverses they had invested in barren and desolate. They just assumed they would increase in value. In the physical world, property developers have been accused of similar land banking tactics.

people were buying [land]but without developing it, so there was no one hanging out there, Reitzik says.

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