Up more than 40% for the month, is this Metaverse Crypto now a buy?

Metaverse crypto Klaytn (CLAY -4.98%) was one of the best altcoins in October, with a gain of more than 40%. Based on the recent surge and the pace of the current trajectory, Klaytn is on track to become a top 50 crypto based on market cap by the end of the year. It is currently trading at $0.24, giving it a market cap of more than $700 million.

However, any metaverse crypto trade for less than $1, regardless of market cap, will be a very speculative investment. While Klaytn has been soaring recently, it is still down nearly 95% from a March 2021 record high of $4.38.

Given these mixed signals, let’s consider the pros and cons of this metaverse crypto to see if it deserves a place in your portfolio.

Image source: Getty Images.

Benefits

While Klaytn may have very little name recognition for the casual crypto investor, one factor in its favor is that it has the backing of Kakao, a large South Korean internet conglomerate. It has led to a number of high-profile partnerships and collaborations, including a central bank digital currency (CBDC) project with the Bank of Korea.

Klaytn also continues to attract top games and metaverse projects to its blockchain. In September, Klaytn even began offering discounts on “gas” (user) fees as an incentive for companies using its blockchain to launch new gaming projects.

Klaytn has also recently taken steps to address tokenomics, which refers to how a crypto is created, distributed or removed from circulation. For example, in October, Klaytn said it planned to reduce block rewards for blockchain validators by a third, which will go a long way toward reducing the rate at which new Klaytn are created. This led to a doubling of Klaytn’s price within a 24-hour period.

Klaytn has also announced a new crypto buyback program, designed to remove some of Klaytn from circulation. Purely in terms of supply and demand, these two measures should contribute to increasing Klaytn’s price in both the short and long term.

Cons

The biggest downside, of course, is that the metaverse niche is notoriously fickle and volatile. People love to point to the billions of dollars that continue to pour into the metaverse, while the results of all these new investments have either been disappointing or uncertain.

Consider Meta platforms (META -1.80%), the company formerly known as Facebook, which has seen a business strategy tied to the metaverse implode this year. Or take the example of two popular metaverse cryptos, Decentralized country (MANA 3.82%) and The sandbox (SANDY 2.11%). Both of these cryptos are still trading below $1 despite the fact that a number of major celebrities have established a presence in their metaverse worlds.

Making things more complex for Klaytn is the fact that it is difficult to perform adequate due diligence on this crypto. This is largely because Klaytn is focused primarily on the South Korean gaming and metaverse market and bills itself as “the dominant blockchain in Korea.”

Although Klaytn has posted press releases detailing all of the South Korean “gaming titans” that have moved to the blockchain, the ability to put it into proper context is difficult unless you have deep knowledge of the South Korean marketplace. In addition, some of the largest US cryptocurrency exchanges have still not listed Klaytn for trading.

Is Klaytn a buy?

The decision to buy any metaverse crypto is based on your belief in the long-term development of this market niche. Therefore, many investors are reluctant to pull the trigger on any metaverse buy right now, including even the highest quality names. Looking closely at Meta’s recent earnings reports, for example, there is reason to be concerned about the short- and medium-term outlook for the metaverse. Everyone seems to be looking for the right strategy that will click with users, developers and investors.

So while Klaytn may be an interesting metaverse crypto to watch due to its recent performance, it is too early to give it a buy recommendation.