The non-fungible token (NFT), which was originally a relatively unfamiliar notion, has now become commonplace. According to research by blockchain specialist Chainalysis, spending on the digital asset increased to about $41 billion by the end of 2021, up from just $1 billion in 2020. NFTs revolutionize art, music, and even sports, allowing artists to monetize their digital creations.
Last year, the NFT market achieved record-breaking sales. For example, a digital picture collage by South Carolina-based graphic designer Mike Winkelmann, known as ‘Beeple’ in the art world, sold for $69.3 million, making it one of the most expensive NFT sales to date. NFTs’ value is determined by several variables, including scarcity, demand for the artwork or, in certain cases, the artist, and the price of the underlying cryptocurrency. A blockchain is used by several online markets that offer NFTs. The most popular ones are currently powered by the Ethereum blockchain. As a result, if you want to purchase or sell NFTs on one of the prominent exchanges, you’ll almost certainly require ether, Ethereum’s native coin.
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However, despite the tremendous volatility of cryptocurrencies, not all NFTs monitor the change of their underlying currency. For example, despite the present crypto market slump, NFT marketplace OpenSea has so far registered $2.3 billion in volume in January, on track to surpass its monthly volume. Mason Nystrom, the senior research associate at crypto analytics firm Messari, revealed this peculiarity to Yahoo! Finance when discussing last weekend’s crypto selloff. Despite the volatility of the crypto market, Nystrom believes that the nature of NFTs may render them independent of it.
“Music, art, antiques, gaming resources, daily fantasy, capital instruments, and more all fall under the umbrella of NFTs. As a result, it’s feasible that NFT commerce rises in one vertical while declining or fluctuating in others “Added he. “In the future, we may witness a larger decoupling of the crypto markets, with one asset, such as art NFTs, performing well while the whole crypto market performs badly, or vice versa.” Another hypothesis came from a collector who goes by the moniker ‘Pranksy.’ “People who spent tens of thousands of dollars on NFTs aren’t going to sell them for half price tomorrow, at least not many of them.” I believe many regards some NFTs as a store of value, much like conventional art markets defying Wall Street trends,” he told Reuters in May last year after his virtual currency portfolio’s value plunged by more than $10 million in a single day.
Collectors think that the value of the artwork, virtual land, and other digital goods represented by NFTs is separate from the value of the cryptocurrency used to purchase them. According to a research published by sciencedirect.com titled “Is non-fungible token pricing influenced by cryptocurrencies?” there is little overflow between cryptocurrencies and non-fungible tokens. The study employed the Bitcoin and Ether datasets, using raw data received from coinmarketcap.com and NFT data gathered from secondary market trades: Decentraland LAND tokens, CryptoPunk pictures, and Axie Infinity game characters, and specific trade data obtained from nonfungible.com.
The study’s findings demonstrate that when it comes to cryptocurrency market volatility, the spillover impact to NFT markets is smaller, implying that the NFT and cryptocurrency markets are separate entities that do not order to overcome this limitation in a significant way. Gauthier Zuppinger, the co-founder of NonFungible.com, told Reuters in May that the NFT market was becoming increasingly de-correlated from the crypto market.