Research shows that NFT sales and prices are driven by luck, scarcity and optimism

A trio of studies published in November may shed some light on social and psychological factors in the non-volatile token (NFT) market.

In three independent studies, researchers at Western University in Canada, Tilburg University in the Netherlands, University of North Carolina at Chapel Hill in the US, and Rennes Business School in France found that personal experience and luck with asset scarcity and consumer optimism were the catalysts for much of the market activity in the NFT space.

NFT market activity

In a study by Western University's Gwaneet Kaur Nagpal and Tilburg University's Luke Rennebaugh, titled “Irrevocable Tokens, Blockchain Hypes, and the Creation of Scarcity,” the researchers analyzed the market dynamics of CryptoPunks, a popular collection of NFT assets. .

“CryptoPunks,” the researchers wrote, “are among the most valued non-fictitious tokens (NFTs), such as CP #5822, which earned $23.7 million in February 2022, and CP #7523, which earned $11.8 million in December 2021.” “

Preliminary findings, according to the paper, include an assessment that buyers who have previously invested in ether (ETH), the native coin of ethereum – the blockchain on which CryptoPunks assets live – are more likely to participate in the market with higher costs. It also saw high profits. The researchers said that ETH gains and losses did not necessarily affect the price of NFTs, but rather influenced the decision to sell or sell assets.

The study also says:

“The authors confirmed that the rarity of both CP types and associated compounds can be determined by statistical and visual measures that can be used to determine values.”

In a separate study titled “Effects of Personal Experience Across Markets: Evidence from NFT and Cryptocurrency Investing,” Chui Sun, a researcher at the University of North Carolina at Chapel Hill, analyzed transaction-level data from “nearly one million” wallets to “study how personal experiences are discovered.” ” contributed to bubbles in the NFT market.

“I find that NFT investors who receive an arbitrarily overvalued NFT in the initial market are more likely to participate in subsequent initial market sales,” Sun wrote. Like” cryptocurrencies.

Contradictory findings

“Experience Effects, Overconfidence, and Optimism,” by Akanksha Jalan and Roman Matkowski of Rennes Business School, delves deeper into the dynamics surrounding investor optimism and their knock-on effects. Cryptocurrency and NFT markets.

Related: ‘WAGMI' mentality is weakening crypto.

In this study, the researchers counter-intuitively found that past negative experiences and investor optimism both positively affect future cryptocurrency and NFT ownership opportunities.

“The fact that individual crypto investors with negative experiences with cryptocurrencies continue to show interest in the asset class may reflect some self-serving bias,” the authors wrote. Control rather than poor decision making on their part (such as market volatility).