Why Metaverse Cryptos Decentraland, Alien Worlds, and Enjin Coin fell on Saturday morning

What happened

The past two weeks have provided significant volatility for crypto investors late Friday and early Saturday morning. This week, that massive sell-off penetrated the price action of various high-profile cryptocurrencies linked to the Metaverse.

Popular Metaverse Coins Decentraland (MANA 2.70% ), Alien worlds (TLM), and Enjin Coin (ENJ 0.39% ) all saw declines of 10.5% or more to their 24-hour lows this morning.

So what

These tokens have all recovered the vast majority, if not all of their losses since that morning drop. In fact, Decentraland is currently up around 2.3%, as of 12:15 p.m. ET, with Alien Worlds and Enjin Coin trading roughly flat over the past 24 hours.

As a result, there is certainly good reason to believe that sentiment among the various tokens of the Metaverse remains strong. The metaverse is a rapidly changing space in which investors remain focused. These periodic declines appear to be “buy-down” opportunities for aggressive investors, at least so far.

Image source: Getty Images.

That said, each of those tokens remains well below its 52 week highs. Decentraland, Alien Worlds and Enjin Coin saw drops of 42%, 96% and 48%, respectively, from their annual peaks. Although dramatic, these tokens are known to become parabolic from time to time, with intermittent periods of longer decline separating larger moves.

Much of this decline is linked to high-level expert discussions around the real utility created by blockchain-related metaverse projects. Concerns about the existing valuation metrics that investors are using to value these tokens are prompting some fundamental investors to look elsewhere for growth in the crypto world. Like stocks, cryptocurrencies can become overvalued as investors place too high a value on future profits, or the value created, by various tokens.

Now what

It is quite difficult to determine how fairly metaverse-related cryptocurrencies are valued or not. On the one hand, the metaverse could offer a unique growth opportunity, to which these platforms offer early access. On the flip side, this gap could turn out to be a flop, with the valuations these tokens received being viewed in hindsight as ridiculous.

There is validity to both sides of the argument at this point. As a result, the volatility we have seen with these metaverse cryptos may continue for some time as price discovery takes place.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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