In November, three studies were published, potentially shedding light on the behavioral and psychological elements influencing the movements within the non-fungible token (NFT) market.
Researchers from Western University, Tilburg University, the University of North Carolina at Chapel Hill, and Rennes Business School explored the driving forces behind NFT market dynamics. One study, "On Non-Fungible Tokens, Blockchain Hype, and the Creation of Scarcity," led by Guneet Kaur Nagpal and Luc Renneboog, analyzed the market dynamics of CryptoPunks, a highly valuable NFT asset collection. Notable sales, such as CP #5822 selling for $23.7 million in February 2022 and CP #7523 fetching $11.8 million in December 2021, were highlighted.
Findings revealed that buyers already invested in Ethereum, the native currency of the blockchain housing CryptoPunks, were more inclined to engage in the market, investing more and experiencing higher returns. Notably, fluctuations in ETH value did not directly affect NFT prices but did influence decisions related to buying or selling these assets. The study emphasized the significance of rarity in determining pricing, measured both statistically and visually based on CryptoPunks' type and accessory combinations.
Another study, "Individual Experience Effects Across Markets: Evidence from NFT and Cryptocurrency Investments," by Chuyi Sun of the University of North Carolina, analyzed transactions from approximately a million wallets. Sun observed that investors who randomly obtained more valuable NFTs in primary market sales were more likely to participate in subsequent sales, paralleling the behavior to buying more "lottery tickets" in the cryptocurrency world.
In the third study, "The Impact of Experience, Overconfidence, and Optimism on Future Cryptocurrency Ownership," by Akanksha Jalan and Roman Matkovskyy of Rennes Business School, the researchers explored investor optimism's influence on cryptocurrencies and NFTs. Surprisingly, individuals with past negative cryptocurrency experiences exhibited continued interest in the asset class, possibly reflecting a self-serving bias by attributing challenges to external market volatility rather than personal decision-making.
