Are the prices of non-fungible tokens influenced by cryptocurrency?

Are the prices of non-fungible tokens influenced by cryptocurrency?

In the early 2021s the Non-fungible Tokens (NFT) were the first use of blockchain technology that gained an unambiguous public acclaim. NFTs can be traded as rights to digital assets (images videos, music, images digital creations) in which ownership information is recorded in smart contracts that are stored on the blockchain. In light of the fact that the fact that the NFT market was created from cryptocurrencies We investigate whether NFT prices are influenced by prices for cryptocurrency. A spillover index only shows small effects of the transmission of volatility between NFTs and cryptocurrency. However, the coherence of waves analysis suggests that there is a co-movement between these both sets of market. This suggests that crypto pricing patterns could be of some help to understand NFT price patterns. However the transmissions that are low-volatility suggest that NFTs could be considered an asset class with low correlation that is distinct from cryptocurrency.

NFTs could be any kind of digital asset. Most commonly, they include artworks and collectibles and objects that are virtual as well as digitalized characters from other games and sports. A NFT begins by registering the the ownership rights of an item on an electronic blockchain, which is typically the ethereum network. The digital asset will then be sold with changes in ownership as well as an currency payment that is recorded in the Blockchain. Learn more about non-fungible tokens influenced by cryptocurrency.

A good illustration of an NFT that is part of the data analysis in this study, is those known as CryptoPunks. CryptoPunks are the most traded market of NFTs at the time of writing, having around $200 million in transactions over the course of its existence. The market began in the early part of 2017, when 10,000 distinct digital characters were developed and identified with individual accounts to the Ethereum blockchain. They were selling between $50 and $100 until about April 2020 after which they began a steady increasing price, which continued to increase until prices rising to the peak in early 2021. In February and March 2021 individuals CryptoPunks were selling for around $20,000 to $100,000.

Are the prices of non-fungible tokens influenced by cryptocurrency?

While traded as cryptocurrency, possess distinct characteristics from cryptocurrencies that are important to consider when trying to comprehend the difference between them. They are primarily designed to be currency, even though they possess some similar properties to assets. NFTs however are designed to be pure assets. Indeed , the term not fungible within the NFT name is the key to this distinction. Interchangeability or fungibility is among the most important features of cryptocurrency and money generally (one bitcoin is exactly the same as another bitcoin, or a dollar is the same as another). The inability to transfer funds between NFTs is among the most important asset attributes that is highly valued.

However Anyone who is involved on the NFT market is aware of the significant connection between market participants in cryptocurrency as well as NFT buyers. This is due to the fact that in order to purchase an NFT it is necessary to make use of cryptocurrency as a method for payment, which can be a high amount of work for many individuals. In this regard, our research studies the cross-over effects between cryptocurrency prices in conjunction with NFT pricing. We expect cryptocurrency to impact NFT pricing, since generally bigger markets are more likely to spill over into smaller market and the cryptocurrency market is a significantly market than NFTs. NFT pricing may also impact the cryptocurrency market, since NFTs as well as their rising popularity show an impressive business application for blockchain. This is why it’s the question of what uses are practical for blockchains as well as cryptocurrency built on top of blockchains ( Morkunas, Paschen, Boon, 2019, Trautman, Molesky Trautman, Molesky, 2019,).

Based on this understanding of the crossover between traders in the two markets This study aims to study the interrelations between cryptocurrency as well as NFT markets. Moratis (2021) shows there is a substantial amount of shock transmission that occurs between the two cryptocurrencies as well as NFTs, which is dominated by Bitcoin leading this transfer. Due to the cross-over of trading between cryptocurrency and NFTs and the potential major influence of the price of cryptocurrency on NFTs We investigate whether the volatility extends to NFT markets. In order to further strengthen our research, we will also examine the possibility of co-movement between cryptocurrency prices and NFT returns, since co-movement has been proven to be a significant characteristic of cryptocurrency markets. The identification of connections between these two types of markets could prove beneficial for both practitioners and researchers alike, as we can look at trends in the pricing of cryptocurrency to help us understand the trends likely to occur for NFT markets.

Our study is a contribution to the emerging NFT pricing research. One study only looked at prices of the NFT market. This study has shown the case of one NFT market pricing patterns don’t display signs of efficiency in the basic sense however there are emerging indicators of changes in the way that pricing is conducted. Due to the variety of NFT markets Our study adds value to Dowling 2021 on a very basic level through being an additional study in this area , and also by expanding the tests to 3 NFT market (two market that are not yet established). Our primary contribution is to demonstrate how NFT pricing is related to the market price of cryptocurrency. We have found a very limited level of transmission and strong evidence of co-movement. This provides an understanding of the way NFT pricing could change as market matures. The research at a more general scale helps in understanding of the way pricing behavior develops in markets that are new ( Khuntia and Pattanayak (2018)).

In the next section , we look at the data and methodological approach. The following section contains the results and analysis. Then, we wrap up the research.

Are the prices of non-fungible tokens influenced by cryptocurrency?

Methodology

Our data set starts with data from the two most important crypto markets, Bitcoin Ether and Bitcoin. We then combine the raw data from coinmarketcap.com. The reason we picked these two currencies is the connection that exists with Ether and NFTs, since NFTs are, as of today mostly associated with Ethereum smart contracts and payments is usually made using Ether. Bitcoin is chosen because it has the biggest dimension and also the biggest transmission of volatility to other currencies.

Our NFT data comes from secondary market transactions in the following categories: Decentraland LAND tokens, CryptoPunk images and Axie The Infinity characters. The individual trade data comes through nonfungible.com and we then aggregate from the trade data into our time window. We picked Decentraland LAND which is an imaginary land NFT that is part of the Decentraland virtual world for comparison with data from Dowling in 2021 and because it is the biggest virtual world and the fourth-largest NFT market in general. We picked CryptoPunk because it is the biggest NFT market, which is the first NFT market. It is also is a little like a representative market of (quite vast) NFT art and collectible market. We selected Axie Infinity as a market with a high volume of transactions in comparison to the two other markets since it’s representative from NFT gaming market, the NFT gaming market, as well as the eighth largest NFT market in total dollars traded.

Prices are listed in USD equivalents, and the returns calculated are on the basis of a weekly basis because of an excessive variance in daily returns information, since trading in a few of the NFTs is extremely restricted in the initial times. There are 4,936 transactions of Decentraland LAND and 7,578 trades in CryptoPunks as well as 95,272 trades in the case of Axie Infinity characters during the period of. There are three distinct prices for the three NFT markets. There is also Axie Infinity characters costing $61 as the average price, Decentraland with $1,109 and CryptoPunks as the most expensive market, with the average price of $4,000.

Issues of policy created through NFT gaming

Issues of policy created through NFT gaming

Axie Infinity raises important questions regarding the nature of games as well as the nature of the game and the connection of work and gaming. In order to play this game, gamers have to purchase three axes, whose cost can differ widely. The last year, players have paid up to $1100 to get started using the games. This kind of high cost could be a hurdle to all other platforms for playing games. However, the main benefit of Axie Infinity’s concept is the way NFTs are creating a distinct market where players can make a surprising amount of money. It’s a “play-to-earn” model, as it’s commonly referred to it, could change the way that gaming is conducted. Axie Infinity takes a 17% cut of each transaction within the game, and generates profits of $700 million in 2021 (though these figures have since drastically decreased with the fall in prices for cryptocurrency). The big tech funders have been noticing. Recent $152 million capital investment in Sky Mavis, the developer behind Axie Infinity, valued the business at $3 billion..

NFTs purportedly are the chain of ownership unique to each user to nft games list however, by manipulating consumers and businesses to accept trades they do not comprehend, hackers could infiltrate this chain and transfer funds to themselves, making the equivalent of half a million dollars to to disappear from the pockets of innocent gamers. The Axie hack highlights the risk inherent in the ever-changing nature of the video game marketplace and highlights the necessity for regulators to establish more effective monitoring and protection for consumers. systems.

A solution to the issues of policy created through NFT gaming

Work as a game

The distinction between labor and play within video games has been blurred. Since the past 20 years or so, the players in Eve Online, a hugely multiplayer game also known as MMO–have had the ability extract resources, and later sell the resulting products on a marketplace and thus make Eve Online the first game to pioneer the integration of monetary transactions, making it difficult to differentiate between labor and play when playing video games. Eve Online puts players at the helm of different spacecrafts which can be optimized to either mine resources in the game or building special combat vessels. The game is unique in its structure: While other MMOs let players “farm” powerful items through battle and quests, Eve is the only one that allows farming of natural resources, also known by the term “mining” in the game. When enough resources are extracted, they are offered for sale on a marketplace in real-world currency similar to U.S. dollars, and the raw materials can then be made into ships and other items. The game relies on the labor of players to produce new products in the game, and keep the economy thriving.

In many online games players are required to work for no pay to move through the game’s world. However, this “grind” of doing repetitive or lengthy tasks can result in the creation of a more effective player character or more things that are not real cash. Grinding is usually a method to increase the amount of amount of time required to complete an activity, and it could help players reach an euphoric state when they’re not actively thinking about what they can do to improve their game. It’s an error to assume that grinding is a popular activity. Some gamers don’t like the excessive amount of grinding that is required in games, and, particularly when it is tied to a hypermonetized model of business they like to think of it as performing a task and not playing. Researchers have discovered this phenomenon in the form of “playbour,” in which gamers engage in normal play which also earns money in real or virtual form. It is a fact that in Eve Online, the players who are focused on mining are referred to as “industrialists,” and their place as the backbone of the game’s market is one of the ways to comprehend the ways in which play and labor become more or less. As there’s an in-game currency that converts to dollars, as well as an in-game economist to supervise the market, it’s unclear what the distinction between a workers and players is or even exists there is any.

In spite of the fact that in-game markets play an important function in the game Eve Online players have fiercely refused attempts by the game’s creator, CCP, to incorporate NFTs into the game and to alter the monetization system. CCP’s reforms caused an large backlash which has resulted in protest as well as the ritual destruction of the game currency, and a plethora of angry messages sent to CCP, the game’s CCP developer. However, was this really the result of a player’s backlash, as well of an industrial strike? It could have been either, and the uncertainty of whether those who earn the money by playing games are considered to be contractors, workers or even nothing at all and has created an unregulated environment that many game developers are keen to enter.

Gaming is evolving

Axie Infinity is a notable illustration to show how the commercial model behind video games are changing. The majority of online games determine their success by participation of players, as the longer a player spends in the game world , the more likely they will purchase items in the game. But what if a corporation could provide an incentive for financial gain to that time? A player may play longer in the game, which would in turn become more involved in JT’s revenue-generating functions. Gaming that uses NFTs promises to turn the fun of gaming to an income-generating labor. This is the model of play-to-earn which allows players to receive money for playing games typically via the increasing value of NFTs and cryptocurrency. Therefore, the more people participate, the more they make. For Axie Infinity the primary gameplay cycle operates in this way Completing levels builds more powerful axies to win games, and provides players with an account that allows axies to “breed” and thus create new axies that can be sold or played with.

Video game producers are rushing to take advantage of the technology prior to regulations limiting the potential revenue streams. Developers such as CCP Games (Crowd Control Productions ), the developer based in Reykjavik, Iceland of EVE Online) want to integrate the NFT into their model of operation in order to generate an ongoing, passive income. The cryptocurrency marketplace FTX is working to introduce their own brand of games-related NFTs. Companies like Ubisoft are developing their own proprietary line of NFTs that will be utilized in their games, but, as with CCP they have been met with massive criticism by gamers. Publishing giant EA has called NFT games ” the future of the industry” in an earnings call recently however, the company swiftly stopped its plans following another gamer criticism.

The move to include NFTs to video game titles is an development of the live service business model that is a type of game that offers ongoing updates as well as items bought in small-scale transactions. Historically the release of video games was as an individual product (like CDs or cartridges). As the internet’s connectivity improved and developers were able to fix issues or add content through downloads. Game developers soon realized that an continuously stream of paid-for games could yield an even greater amount of income through a development cycle than just a single shipment of products that led to the concept for Games as a Service, or GaaS. The potential for profit from this model is staggering. For example, in 2019 the live-streaming services like FIFA Ultimate Team generated more than $1.6 billion simply from these tiny transactions. The publishing company EA Live services currently provide up to 70 percent of the company’s revenues this is a radical contrast to how publishers of games previously earned revenue. But , as game journalist Stephen Totilo explains live service games require not only the tens or millions of dollars in upfront development costs, but also a lot thousands of dollars “to keep content flowing.”

The incorporation of NFTs into this business model is a chance to provide new opportunities to game developers to increase their revenues. NFTs are sold to players in the same way as other content that is downloaded can be sold as a product offered through a store in which the initial sale is profits for the game developer. However, these tokens are encoded using what’s called the ” smart contract,” which is a piece of code embedded in the NFT which sends an income payment to the creator of the token. In this instance, the company that makes the game. This type of system allows game developers to make their products monetizable again and again, utilizing the potential of future player-to player sales to create an ongoing stream of income.

The model is an uncanny resemblance to existing markets for game-related items. World of Warcraft built a popularly wealthy ecosystem where players could resell game items as …