Non-fungible Token (NFT) Markets on the Ethereum Blockchain: Temporal Development, Cointegration and Interrelations

23 Pages Posted: 16 Aug 2021

Date Written: August 13, 2021

Abstract

The market for non-fungible tokens (NFTs), transferrable and unique digital assets on public blockchains, has received widespread attention and experienced strong growth since early 2021. This study provides an introduction to NFTs and explores the 14 largest submarkets using data from the Ethereum blockchain between June 2017 and May 2021. The analyses rely on (a) the number of NFT sales, (b) the dollar volume of NFT trades and (c) the number of unique blockchain wallets that traded NFTs. Based on the number of transactions and wallets, the Ethereum-based NFT market peaked at the end of 2017 due to the success of the CryptoKitties project. As of 2021, fewer transactions occur but the traded value is much higher. We find that NFT submarkets are cointegrated and feature various causal short-run connections between them. The success or adoption of younger NFT projects is influenced by that of more established markets. At the same time, the success of newer markets has an impact on the more established projects. The results contribute to the overall understanding of the NFT phenomenon and suggest that NFT markets are immature or even inefficient.

Keywords: NFTs, non-fungible tokens, cryptocurrency, cointegration, Granger causality

Suggested Citation

Ante, Lennart, Non-fungible Token (NFT) Markets on the Ethereum Blockchain: Temporal Development, Cointegration and Interrelations (August 13, 2021). Available at SSRN: https://ssrn.com/abstract=3904683 or http://dx.doi.org/10.2139/ssrn.3904683

Lennart Ante (Contact Author)

Blockchain Research Lab ( email )

Colonnaden 72
Hamburg, 22303
Germany

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