(Updated 19. September 2022)
Decentraland was my first encounter with "the metaverse". In this article, I'm looking into the question "Can Decentraland reach $100?"
Here's the short answer:
My scenario allowed Decentraland to reach $100 if it captured a significant share of value created in the metaverse. At that price, its market capitalization would be $170 billion.
The main obstacle and reason why Decentraland might struggle to reach 100 dollars is that it has a huge supply. Currently, there are 1.7 billion tokens in circulation, which logically makes the price low.
Remember: Price = Market Cap / Circulating Supply.
If the circulating supply is high, the price must be low. However, a large enough market cap could still take Decentraland to $100.
"Just how big does the market cap have to be?"
We can calculate that by manipulating the equation above like this:
Price * Circulating Supply = Market cap
$100 * 1,700,000,000 = $170,000,000,000 = 170 Billion USD
**In other words:
For Decentraland to reach $100, the market cap has to reach $170 Billion**.
Related analysis: Can The Sandbox Reach $1000?
To give some perspective, the image below shows a hypothetical Decentraland at $100 side by side with the expected Bitcoin and Ethereum prices: (historical $100K Bitcoin scenario and historical $8K Ethereum scenario)
If Decentraland at $100 had a market cap bigger than Bitcoin or Ethereum, I would deem it unrealistic.
However, as we can see in the image above, Decentraland at $100 does not even come close to any of them.
That comparison kept a $100 Decentraland within the bounds of my scenario.
Let’s get into the what, and the how, and analyze it deeper:
How Can Decentraland Reach $100?
The upper-end scenario involved trillions of dollars in market capitalization.
If Decentraland captured a large share of that potential value, the scenario could extend into the thousands of dollars. But I'm getting ahead of myself...
Think about it:
Decentraland is recreating the world in a digital format. It creates value from real estate, art, music, games, gambling, collectibles, parties/festivals, in-game businesses, marketplaces, and the list goes on...
We've got respected macro experts like Raoul Pal saying that "the metaverse", which Decentraland is creating, might double the global GDP.
His reasoning is basically like this:
If we copy the world into a digital format, we could potentially create the same amount of value in the metaverse as in the "real" world, and as a consequence, double the global GDP.
What exactly does "double the global GDP" mean for Decentraland?
Well, the current global GDP is estimated to be roughly 85 Trillion USD. To simplify this a lot, we can think of the global GDP as "the world's market cap".
If Decentraland gets a 100% market share, which it won't, and its market cap reaches $85 Trillion, the price would reach:
$85 Trillion / 1 700 000 000 = $50 000
If Decentraland gets a 20% market share, which is highly unlikely, of the metaverse and reaches a market cap of 0.2 * $85 Trillion = $17 Trillion the price would be:
$17 Trillion / 1 700 000 000 = $10 000
Even if it only captures 1% of it, which is more likely, the price would be:
$0.85 Trillion / 1 700 000 000 = $500
With this in mind, I did not regard $100 as impossible for Decentraland. However, this was a long-term thought experiment—perhaps a decade or two, or even more.
Nevertheless, we see the beginnings of this value explosion already. There have been huge concerts, parties, art gallery openings, other social events, and much more. The real estate part and the advertising from businesses in Decentralands metaverse are also taking off as I write this.
I explored the broader thesis in The Future of Decentraland.
Conclusion: Yes, Decentraland Can Reach $100
My conclusion was that Decentraland could reach $100 if it captured a significant share of value created in the metaverse.
If Raoul Pal's metaverse scenario proved directionally right, Decentraland could move beyond $100; the thousands-of-dollars case required a much larger share of that value.
Oh, and please remember this:
This article is NOT a price prediction type of article. All of this is purely hypothetical and should be considered a thought experiment. I hope you found it interesting and illuminating.