Apple’s rumored VR headset launch seemed to fuel a sharp rally in metaverse coin projects. But according to Nivesh Rustgi, the data shows that the momentum is unsustainable.
MANA and SAND saw double-digit gains
cryptocoin.comAs you follow, the metaverse scam, which started in 2021, is almost completely over by the end of 2022 as the top projects in the space, Decentraland and The Sandbox, lost 95% of their market capitalizations. The most obvious reason for the decline was the lack of user growth. Still, the metaverse narrative is far from dead and will grow in the future. Reportedly, Apple will launch its virtual reality hardware in the spring of 2023. The announcement was a positive catalyst, resulting in a double-digit price increase for Decentraland’s MANA and The Sandbox’s SAND.
While there is evidence that positive buying volume is bolstering the pump, weak fundamentals of metaverse platforms and overheated market indicators suggest that the price pump risks a rapid reversal.
Apple ‘pump and dump’!
Facebook’s (Meta) metaverse foray was one of the most important catalysts for metaverse coin projects. The growth idea of Decentraland and The Sandbox is that a decentralized metaverse will evolve further than the centralized version of Meta. However, the technology has not yet become popular with the masses. In 2022, the percentage of VR users among Steam gamers was below 2%, and usage has yet to increase in the last two years. This is discouraging for technology adoption. Because the game industry was the first to adopt it.
The technology suffers from a fundamental issue where VR headsets are not suitable for long hours. Research has shown that prolonged use of headphones can cause mental health problems. Apple’s latest VR news, metaverse coin projects have caused a surge. However, this does not mean the success of these projects. Meta-owned Samsung and Oculus already have devices on the market, which raises the question about the potential impact of Apple’s new devices on VR adoption.
These obscure the reality of a constant metaverse coin rally
Presumably, metaverse enthusiasm peaked in the last quarter of the same year with Facebook’s rebranding as Meta. However, the usage statistics for the two most popular metaverse platforms, The Sandbox and Decentraland, have not been impressive throughout the price hike. Fewer than 5,000 unique active wallets (UAWs) were interacting with smart contracts at the peak on both platforms.
Since then, usage has dwindled further, with less than 1,000 UAWs per day, reflecting the dire fundamentals. Also, while token prices have risen, Non-Fungible Token (NFT) sales for The Sandbox plots have not improved since the last quarter of 2022 with similar prices and volume. This once again confirms that activity across the platform has been uneventful.
Risks remain for Metaverse coin projects
Decentraland is also on the list of creditors of Genesis, which filed for bankruptcy last week. The defunct lending firm owes Decentraland $55 million, according to court filings. But Genesis only has $7.8 million in debt, according to Decentraland’s Discord. “Treasury is in good health and the loan amount does not represent a significant portion of the Foundation’s treasury,” a community spokesperson added.
The topic of genesis has been known for a long time. So it’s possible that the organization has already resolved the issue. However, it will likely affect the rate of ecosystem growth, which is small in the beginning. On the other hand, the SAND token suffers from the risk of dilution due to monthly unlocking until the end of the third quarter of 2024. If market conditions do not improve, some investors may be inclined to sell their tokens.
Despite its shortcomings, the market will consistently appreciate first movers in space, as long as technology has the potential to become a part of the future. The problem is that long-term visions may not sustain short- and medium-term rallies.
What does the technical data show?
The spike after days of low volatility caused the Relative Strength Index (RSI) metric to show overheated data. The situation has become more challenging as the price trades with resistance from the breakout zone of the FTX collapse. Nansen data shows that the exchange entries for MANA and SAND were $8.4 million and $12.6 million, respectively. This is a sign that more investors are moving to sell rather than buy to enter a positive breakout.
However, the recent increase in MANA was supported by healthy volume, as reported by data from analytics firm Santiment, which is encouraging for buyers. However, MANA must surpass the $0.735 resistance and support area for the upside move to continue.
A similar trade setup for SAND sees resistance for the token at around $0.93. If buyers conquer this level for the metaverse coin, we can expect the rally to continue. However, given the fundamental indicators and short-term risks, it is unlikely that the price will break above the resistance.
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