NFT sales and pricing are driven by luck, scarcity, and optimism, according to multiple studies

A trio of research revealed in November could shine some gentle on the social and psychological components that encourage motion within the non-fungible token (NFT) market.

Researchers from Western College in Canada, Tilburg College within the Netherlands, the College of North Carolina at Chapel Hill within the U.S., and Rennes Faculty of Enterprise in France, throughout three impartial research, discovered that private experiences and luck, together with asset shortage and shopper optimism, had been catalysts for almost all of market motion within the NFT area.

NFT market motion

In a research carried out by Guneet Kaur Nagpal of Western College and Luc Renneboog of Tilburg College, entitled “On Non-fungible Tokens, Blockchain Hypes, and the Creation of Shortage,” the researchers analyzed the market dynamics of “Crypto Punks,” a well-liked collection of NFT belongings.

“CryptoPunks,” write the researchers, “are among the many most valued Non-Fungible Tokens (NFTs), with outstanding gross sales reminiscent of CP #5822 fetching USD 23.7 million in February 2022, and CP #7523 acquiring USD 11.eight million in December 2021.”

The first findings, in line with the paper, embody the evaluation that consumers who had been already invested in Ethereum (the blockchain on which CryptoPunks belongings reside) had been extra prone to interact out there at larger prices and likewise noticed larger good points. The researchers additionally famous that Ethereum good points and losses didn’t essentially have an effect on the worth of NFTs, however did affect the choice to promote or resell belongings.

Moreover, the research states:

“The authors set up that the creation of rarity, for each CP sorts and accent combos, which could be captured by statistical and visible measures, determines pricing.”

In a separate research entitled “Private Expertise Results throughout Markets: Proof from NFT and Cryptocurrency Investing,” researcher Chuyi Solar of the College of North Carolina at Chapel Hill examined transaction-level information from “about a million” wallets to check how “private experiences” contributed to bubbles within the NFT market.

”I discover that NFT buyers who randomly obtain extra beneficial NFTs within the major market usually tend to take part in subsequent major market gross sales,” writes Chuyi Solar. They add that buyers who randomly obtain extra beneficial NFT tokens usually tend to finally buy “extra lottery-like” cryptocurrencies.

Counterintuitive findings

A 3rd research, carried out by Akanksha Jalan and Roman Matkovskyy of Rennes Faculty of Enterprise, entitled “The Impression of Expertise, Overconfidence and Optimism on Future Cryptocurrency Possession,” takes a deep dive into the dynamics surrounding investor optimism and their knock-on impact for the cryptocurrency and NFT markets.

Associated: The ‘WAGMI’ mentality is undermining crypto

On this research, the researchers discovered, counter-intuitively, that adverse previous experiences and investor optimism each positively have an effect on the percentages of future cryptocurrency and NFT possession.

“The truth that particular person crypto buyers with adverse experiences with cryptocurrencies proceed to indicate curiosity within the asset class might mirror some type of self-serving bias,” write the authors, earlier than including “with these buyers probably attributing their losses to components past their management (like market volatility) reasonably than poor decision-making on their half.”