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3 reasons why the MANA and SAND metaverse token rally could end soon

3 reasons why the MANA and SAND metaverse token rally could end soon

By the end of 2022, the two top projects in the field, Decentraland and The Sandbox had lost 95% of their market capitalization, and the hype surrounding the metaverse that had started in 2021 had almost completely disappeared. Lack of usage growth was the main cause of the decline. 

However, the metaverse narrative is still very much alive and will continue to develop. Apple will reportedly introduce its VR technology sometime in the spring of 2023. The announcement served as a catalyst for MANA and SAND, driving up their prices by double digits. 

Although the price pump appears to be supported by positive buying volume, the weak metaverse platform fundamentals and overheated market indicators indicate that the price pump runs the risk of quickly reversing.

The Apple pump and dump

One of the most significant drivers of metaverse tokens was Facebook’s (meta) entry into the metaverse. A decentralised metaverse would thrive more than Meta’s centralised version, according to the theory guiding the development of Decentraland and The Sandbox. 

However, the public has not yet embraced technology. Less than 2% of Steam users were VR users in 2022, and usage hasn’t increased over the previous two years. The gaming industry was the first to adopt the technology, which is discouraging its adoption. 

VR headsets are uncomfortable to wear for extended periods of time, which is a fundamental problem with the technology. Long-term headset use has been linked to mental health issues, according to studies. 

The price of Apple’s metaverse tokens increased because of recent VR news, but this doesn’t guarantee that these projects will be successful. The question of whether Apple’s new devices will have an impact on the adoption of VR is raised by the existence of devices on the market from Samsung and Oculus, both of which are owned by Meta.

Poor usage data hinders the reality of a sustained metaverse token rally.

The last quarter of the same year, when Facebook changed its name to Meta, is arguably when the metaverse euphoria peaked. However, throughout the price increase, the usage figures of the two most well-known metaverse platforms, Sandbox and Decentraland, remained underwhelming. At the peak on both platforms, less than 5,000 distinct active wallets (UAW) were interacting with the smart contracts. 

Since then, usage has further declined, with less than 1,000 UAWs being produced each day, which reflects poor fundamentals. 

Furthermore, since the final quarter of 2022, NFT sales for Sandbox lands haven’t improved with comparable prices and volume, despite the spike in token prices. It demonstrates once more how uneventful platform activity is.

Token dilution risks remain

Genesis, which filed for bankruptcy last week, lists Decentraland among its creditors as well. The former lending company owes Decentraland $55 million, per court documents. 

However, Genesis only owes $7.8 million, according to Decentraland’s Discord server. “The Treasury remains healthy, and the credit amount does not represent a significant portion of the Foundation’s treasury,” the community spokesperson continued. 

Since the Genesis problem has been well-known for a while, it’s possible that the organisation has already resolved it. It will, however, most likely have an effect on the ecosystem’s initial slow growth rate. 

The SAND token, on the other hand, faces a dilution risk as a result of monthly unlocks through the end of Q3 2024. Some investors may be tempted to sell their tokens if the market situation does not improve.

As long as there is a chance that the technology will be used in the future, despite its drawbacks, The market will continue to value early adopters in the industry. The issue is that short- to medium-term rallies might not be supported by long-term visions.

The Relative Strength Index (RSI) metric has overheated as a result of the sudden spike after days of low volatility. The situation becomes more difficult as the price trades at resistance from the FTX breakdown region. 

According to Nansen data, MANA and SAND exchange inflows were $8.4 million and $12.6 million, respectively. It implies that more investors chose to sell rather than buy into a positive breakout. 

Nonetheless, according to data from analytics firm Santiment, the recent uptick in Decentraland was supported by healthy volume, which is encouraging for buyers. To continue rising, MANA/USD must break through the $0.735 resistance and support zone.

Resistance for SAND is seen around $0.93 in a similar trading setup. If buyers surpass these levels for metaverse tokens, we can expect the rally to continue. However, based on fundamentals and short-term risks, a price break above the resistance remains unlikely.

 

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