First Mover Asia: Why the Metaverse Is a Potemkin Village

Despite breathless headlines about a digital land rush, metaverse platforms are struggling to attract brands and users; bitcoin ticks up slightly.

AccessTimeIconMay 2, 2022 at 11:44 p.m. UTC
Updated May 11, 2023 at 4:44 p.m. UTC
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Good morning. Here’s what’s happening:

Prices: Bitcoin and ether are flat, but most other major cryptos decline.

Insights: The metaverse offers the illusion of success; the reality is different.

Technician's take: A decisive breakout or breakdown in BTC could occur this month.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover, our daily newsletter putting the latest moves in crypto markets in context.


Bitcoin (BTC): $38,595 +0.4%

Ether (ETH): $2,863 +1.1%

Biggest Gainers

Asset Ticker Returns DACS Sector
Algorand ALGO +2.1% Smart Contract Platform
Litecoin LTC +1.5% Currency
Ethereum ETH +1.1% Smart Contract Platform

Biggest Losers

Asset Ticker Returns DACS Sector
Polkadot DOT −2.6% Smart Contract Platform
Solana SOL −2.3% Smart Contract Platform
Filecoin FIL −2.3% Computing

Bitcoin, ether tick up ever so slightly

Will May bring flowers for crypto investors?

So far the traditionally strong month for bitcoin hasn't done much to make make anyone forget a dismal April.

The largest cryptocurrency by market capitalization was recently trading at about $38,600, not far off where it has stood for the past three days. Ether, the second-largest crypto by market cap, was changing hands at roughly $2,860, up slightly over the same period. Other major cryptos were largely in the red as risk-averse investors veered away from lesser digital assets such as CRO, off nearly 11% at one point, and meme token SHIB, down more than 4%.

This cautiousness comes as the U.S. central bank eyes a likely half-point interest rate hike later this week. How crypto prices react following the increase could follow two paths, wrote 3iQ Digital Asset's Head of Research Mark Connors in an email to CoinDesk. Connors noted the potential for a continued "divergence in volatility between U.S. equities and bitcoin." Bitcoin's volatility has decreased significantly over the past five years even as stock volatility has risen, a sign of increasing confidence in digital assets.

But he also said that "if rates continue to rise and push credit (investment grade, high yield) lower, risk of liquidations and deleveraging will impact all assets, including crypto (prices lower) in the short term."

Bitcoin sank 17% in April and is down 44% since reaching its all-time high of approximately $69,000 last November. May has traditionally been a stronger month with BTC gains averaging 27% over the past 11 years. But the cryptocurrency has increasingly correlated to U.S. equities, which have plunged this year, particularly the once high-flying tech sector with the Nasdaq 100 made up largely of tech, biotech and healthcare firms down 13% in April. Major indices were up a tick on Monday, mirroring bitcoin and ether.

Meanwhile, European Union energy ministers discussed ways to wean their countries from Russia oil and gas. Brent crude oil, a widely regarded measure of energy prices, was trading at $107 per barrel, up about 40% from the start of the year. Ten-year Treasury yields soared past 3% for the first time in five years as prices for Treasury bonds continued their 2022 slump.

Connors saw "no material price impact to crypto" in this development and struck an optimistic note for BTC regardless of the size of the interest rate increase and stocks' performance. "Bitcoin will outperform equities regardless of the rate hike, our data indicates," he said in a follow-up phone interview.


S&P 500: 4,155 +0.5%

DJIA: 33,061 +0.2%

Nasdaq: 12,536 +1.6%

Gold: $1,862 -1.8%


The metaverse is a Potemkin village

In 1787 Prince Grigory Aleksandrovich Potemkin, a Russian field marshal, constructed facades of villages in the then-recently annexed Crimea to give traveling royal Catherine the Great something to look at while she toured the area. Nothing was behind these buildings. While they looked like sound structures, from afar they were a facade.

Fast forward to today and "Potemkin village" is an idiom that describes any construction whose sole purpose is to hide what’s behind it. To make the observer from afar think that something is more complete than it is.

So what does this have to do with the metaverse?

A few weeks ago a public relations agency pitched an interview with a "metaverse landlord," someone who had an acquired a large amount of land in the metaverse and – presumably because this was included in the pitch – was now a well-to-do member of the crypto landed gentry because of the income paid by the tenants residing on his virtual holdings.

Naturally, we wanted to see some on-chain data. The beauty of the blockchain is the ability to verify any sort of claim about trades or gains because they are all recorded and verifiable via a block explorer. In the analog world, it’d be as if you had the ability to analyze any company’s balance sheet, no matter if it is public or private, to verify the statements it makes. No need for due diligence research, it’s all there on the blockchain.

But this request was ignored, and the PR person faded away because there wasn’t much substance to the metaverse landlord claims. There’s no doubt this person owned land in the metaverse, but was he actually making any money from this endeavor?

Highly unlikely, because metaverse platforms continue to struggle to attract users. Despite Decentraland’s $2.3 billion valuation, there are only around 1,500 active players, according to publicly available data and a user base of 822 monthly active users with a crypto wallet (it’s possible to log into Decentraland as a guest without a wallet).

Despite all this, Decentraland non-fungible tokens (NFT) that denote land title continue selling, according to on-chain data. NFT Stats’ tracker shows that over the last week the median price of a Decentraland land NFT was $6,800 and that 117 NFTs were sold.

The most valuable of all these recently sold NFTs is currently “Fashion Street Estate,” which sold for $234,000 in April. And what’s on this land? This isn’t to be confused with the dozen other “Fashion Street Estate(s)” that are listed on OpenSea. One was sold for 334 ether ($950,000) late last year (though its ownership history looks like wash trading) and was supposed to host a virtual Sketchers store, but it doesn’t appear to have gotten off the ground.

Despite the breathless headlines about the digital land rush to anticipate a population of netizens and brands moving in, there hasn’t been anything to materialize to meet these expectations. There are virtual landlords, but nobody pays the rent.

Of course, this isn’t meant to be a total indictment of metaverses. A very popular one currently exists called Steam, a game service where your unique identity can be brought between virtual worlds. Almost 30 million people are online over a given weekend, blasting away on games like Counter-Strike or Grand Theft Auto V.

Metaverses have existed before, too. In the late 1990s, there was Cybertown, a 3D-based virtual world with jobs, economies and homes. The name of its developer, Blaxxun, was even a reference to Black Sun, the name of a metaverse club in Neil Stephenson's "Snow Crash." Then there was Second Life, which improved upon many lessons learned from Cybertown, and whose founders are still around to be vocal critics of the crypto iteration of the metaverse.

All these platforms had users and economies, but none of the noise of crypto. No inflated expectations.

Now we have a metaverse Potemkin village with Web 3 investors pushing a product that data shows very few people are actually interested in.

Technician's take

Bitcoin daily price chart shows support/resistance. (Damanick Dantes/CoinDesk, TradingView)
Bitcoin daily price chart shows support/resistance. (Damanick Dantes/CoinDesk, TradingView)

Bitcoin (BTC) has been in a short-term downtrend since late March, confirmed by a series of lower price highs. That indicates persistent selling pressure, although support at $37,500 could sustain the current price range.

Further, BTC has been anchored around $40,000, the midpoint of a three-month price range, which suggests indecision among buyers and sellers.

Typically, BTC consolidates within a three-month price range following an extreme move such as the 50% sell-offs that occurred after the April and November price peaks around $64,000 and $69,000 last year. That means a decisive breakout or breakdown could occur sometime this month.

On the weekly chart, bitcoin has experienced a loss of upside momentum, which suggests limited upside beyond the $46,000-$50,000 resistance zone. A bearish set-up on the monthly chart increases the risk of a breakdown in price.

For now, BTC is on watch for a countertrend bullish signal on the weekly chart, per the DeMARK indicators. If confirmed, BTC could experience a brief price bounce, consistent with strong seasonal trends in May.

Important events

9 a.m. HKT/SGT(1 a.m. UTC): Australia TD Securities inflation (MoM/YoY/April)

12:30 p.m. HKT/SGT(4:30 a.m. UTC): Reserve Bank of Australia interest rate decision

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Greg King of Osprey Funds joined "First Mover" to discuss crypto markets following Warren Buffett's bitcoin comments and Solana's setback. John Olsen from the Blockchain Association reacted to the New York State Assembly's vote to ban new crypto mines that don't use renewable energy. Former presidential candidate and GoldenDAO founder Andrew Yang shared his thoughts on the U.S. midterm elections and the role of crypto. Plus, three-time National Basketball Association champion Rick Fox explained his crypto journey.

Headlines Slashes Card Rewards, CRO Tokens Drop 11% as Community Reacts: In addition, staking rewards would no longer be offered to cardholders after the completion of the current 180-day period.

ApeCoin Drops, Ether Trades Flat Despite Record $200M Gas Burn: Over 71,000 ether were burned on Sunday amid demand for a new NFT project. But that did little to affect ether prices as the broader market traded flat.

Michael Saylor and Jack Dorsey Among Bitcoin Heavyweights Defending Mining in Letter to EPA: Bitcoin mining sites are no different than data centers operated by mega-cap tech firms such as Amazon (AMZN), Apple (AAPL), Alphabet's (GOOG) Google, Meta (FB) and Microsoft (MSFT), the authors wrote.

BAYC Team Raises $285M With Otherside NFTs, Clogs Ethereum: The virtual land rush for the ape-centered metaverse project has already cost traders more than $176 million in fees alone.

Solana Goes Dark for 7 Hours as Bots Swarm ‘Candy Machine’ NFT Minting Tool: It wasn’t immediately clear how the bot traffic overcame network safeguards.

Wikipedia to Stop Accepting Crypto Donations on Environmental, Other Grounds: The announcement follows a vote by the Wikimedia community in which 71.2% voted in favor of a proposal to stop accepting cryptocurrency.

Longer reads

Why We Need Crypto Payments to Work: In a word: competition.

Today's crypto explainer: How to Stake Cardano (ADA)

Said and heard

“Whether it goes up or down in the next year, or five or 10 years, I don’t know. But the one thing I’m pretty sure of is that it doesn’t produce anything. It’s got a magic to it and people have attached magic to lots of things.” (Warren Buffett at Berkshire Hathaway annual meeting) ... "Hedge funds and other professional investors were already trading cryptocurrencies, but many money managers – from mutual-fund giants to pension funds – are increasingly eager to find a way into the crypto markets, executives said. Inflation and rising interest rates have damped expectations for returns on stocks and bonds, making cryptocurrencies more attractive." (The Wall Street Journal) ... "The blockchain market size for retail is set to reach $4.6 billion by 2028, as more industry professionals see its value and strive to meet customer demands. Yet, large-scale corporations won’t be the only ones fueling this growth. Small and medium-sized businesses also reported a 75% increase in customers and suppliers asking for cryptocurrency as a payment option." (Sesie Bonsi, founder and CEO of the payment platform Bleu, for CoinDesk)


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CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Damanick Dantes

Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

James Rubin

James Rubin was CoinDesk's U.S. news editor based on the West Coast.

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