In 2021, cryptocurrency attracted more attention and money than all previous years combined, to the tune of roughly $30B. This is about four times the amount of money invested in cryptocurrency in previous years. The increased interest in NFTs (non-fungible tokens), cryptocurrencies, the Metaverse, and the blockchain as a whole is changing the investment landscape. Why should venture pay attention to this new investment landscape? How will NFTs affect venture capitalists in the future? 

For years, many questioned the legitimacy of cryptocurrencies and NFTs alike as they departed from the normal method of exchanging money. They seemed like a niche interest for a particular group of people until media popularization took them to a whole new level. 

There have been many occurrences over the last few years that led to this surge of popularity. Bitcoin’s exchange-traded fund (ETF) hit U.S. markets last October, helping to skyrocket its popularity and turn cryptocurrency into more of a household term than it was in years past. Combine that with the increasingly digital nature of our workforce and world, and you have a perfect storm in which Bitcoin can thrive. 

What Does This Mean for Venture Capitalists? 

VCs are always scanning the market, looking for the next innovative concept or business to invest in. And there’s nothing on the market right now that’s quite as innovative as cryptocurrency and the types of businesses cryptocurrencies can enable. 

Investors who are seeking to be part of the digital revolution are flocking to crypto projects like blockchain-based apps and other platforms fueled by the possibility of cryptocurrency. According to data from Pitchfork, VC investors funneled $10B globally into cryptocurrency in the first quarter of this year alone. Many of these VC investors believe that cryptocurrency will provide financial infrastructure for our society’s future—which is, more than likely, a fair assessment. 

Cryptocurrency and the Metaverse

Digital tools will need digital financial structures to keep up with society’s current pace of growth. Nowhere is this more evident than in the Metaverse.

The Metaverse is, essentially, the future of the internet. Roughly six months after Mark Zuckerberg announced Facebook’s transition into the Metaverse, many people are still left wondering how this new form of social networking will really affect their day-to-day lives. Facebook’s parent company, Meta, is essentially building a giant VR platform for social interaction. The tech required for this goes far beyond Facebook. New hardware and software, virtual and augmented reality tools, and more will go into this new way of interacting with one another. 

Think about it this way—in the Metaverse, you can interact with others all across the globe in your avatar form. Within the Metaverse, you can run a business, own property, purchase goods, and more. A virtual world spanning across the reaches of the globe that exchanges currency for goods and services (virtual or otherwise) needs a currency that will support it. Enter cryptocurrency. The Metaverse and cryptocurrency support one another and will be partners in our new method of interaction. So it is only natural to assume that investors will want to be involved.

Technology and Cryptocurrency

The technological implications of cryptocurrency should also be of great interest to investors. While the value of traditional money is somewhat dependent upon the government and requires a vast amount of government-run infrastructure to support it, cryptocurrency does not require the same level of infrastructure and shows significant promise for future growth. As cryptocurrency continues to grow and people begin to transact more and more within the Metaverse, technology will continually innovate to support it. Many governments have begun drawing up proposed regulations to control cryptocurrency, but it is still in the early stages. This should have exciting implications for anyone who wants to get in on the early stages of a project that could potentially define the future. 

As people become more comfortable with cryptocurrency as the main medium of purchasing goods within the Metaverse, users will eventually become comfortable using it outside of the Metaverse as well. This means that banks and financial institutions will need to find a way to facilitate cryptocurrency or blockchain-derived financial transactions. Some, like PayPal, have already addressed this issue. 

A virtual world using virtual money to exchange virtual goods might seem like a stretch for some, but the Metaverse will transform not only how we see the world, but how we participate in and interact with it. This will be the next generation and iteration of the internet (which some have dubbed “web3”). Venture capitalists who are truly forward-thinking won’t overlook cryptocurrency this year or in the years to come. Investors who seriously consider how they can become involved with cryptocurrency will help shape its future.