A trio of studies published in November may shed some light on the social and psychological factors motivating movement into the non-fungible token (NFT) market.
Researchers from Western University in Canada, Tilburg University in the Netherlands, the University of North Carolina at Chapel Hill in the US and the Rennes School of Business in France found in three independent studies that personal experiences and happiness, along with scarcity of assets and consumer optimism have been the catalyst for most of the market movement in the NFT space.
NFT market movement
In a study conducted by Guneet Kaur Nagpal of Western University and Luc Renneboog of Tilburg University, entitled ‘On Non-fungible Tokens, Blockchain Hypes, and the Creation of Scarcity’, the researchers analyzed the market dynamics of ‘Crypto Punks’, a popular series NFT assets.
“CryptoPunks,” the researchers write, “are among the most highly valued Non-Fungible Tokens (NFTs), with notable sales such as CP #5822 which raised $23.7 million in February 2022, and CP #7523 which raised 11 in December 2021. raised $8 million. ”
Key findings, according to the article, include the assessment that buyers who were already active in Ethereum (the blockchain on which CryptoPunks’ assets reside) were more likely to be active in the market and also experienced higher profits. The researchers also noted that gains and losses in Ethereum didn’t necessarily affect the price of NFTs, but they did affect the decision to sell or resell assets.
Furthermore, the study states:
“The authors find that creating rarity, for both CP types and accessory combinations, which can be captured by statistical and visual measurements, drives price.”
In a separate study titled “Personal Experience Effects across Markets: Evidence from NFT and Cryptocurrency Investing,” researcher Chuyi Sun of the University of North Carolina at Chapel Hill examined transaction-level data from “approximately a million” wallets to study how “personal experience has contributed to bubbles in the NFT market.
“I find that NFT investors who randomly receive more valuable NFTs in the primary market are more likely to participate in subsequent primary market sales,” Chuyi Sun writes. They add that investors who randomly receive more valuable NFT tokens are more likely to end up purchasing “more lottery-like” cryptocurrencies.
Counterintuitive findings
A third study, conducted by Akanksha Jalan and Roman Matkovskyy from the Rennes School of Business, titled ‘The Impact of Experience, Overconfidence and Optimism on Future Cryptocurrency Ownership’, delves deep into the dynamics surrounding investor optimism and their knock-on effect on the future. the cryptocurrency and NFT markets.
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In this study, the researchers found, counterintuitively, that negative past experiences and investor optimism both positively influence the chances of future cryptocurrency and NFT ownership.
“The fact that individual crypto investors with negative experiences with cryptocurrencies continue to show interest in the asset class could reflect a form of selfish bias,” the authors write, before adding “where these investors are likely to attribute their losses to factors over which they have no control.” to have control. (such as market volatility) rather than poor decision making on their part.”