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Highlights
- Crypto Analytics firm Nansen's report suggests that NFTs have given returns of 90.9% (YTD) when denominated in ETH and 35.9% (YTD) when denominated in US Dollars.
- According to the data, the NFT 500 index showcases a -0.46 correlation with Bitcoin and 0.6 correlation with Ethereum.
- So, anything that showcases 1 or more means a positive correlation, and anything less than 1 indicates that the variables are moving in the opposite direction.
The non-fungible tokens (NFT) took the world by storm in 2021. Many had dubbed it to be one of the breakout years for NFTs, with experts even pitching that the market for the NFT will only grow further in 2022. However, sceptics still question the sustainability factor of the NFTs and claim that one of the reasons why NFTs did so well was due to the robust performance of the cryptos in 2021.
But after the year dubbed as the year of growth for the NFTs, it has started losing steam. If you look at the NFT sales in the past 30 days, 50.15% and stands at US$32 million, according to NonFungible market tracker. Compared with leading cryptos such as Bitcoin and Ethereum, BTC has dropped roughly 6.3%, and ETH has seen a fall of over 8.5% in the past 30 days, according to CoinGecko.
So, what do the stats say?
According to the crypto analytics firm Nansen, as the crypto market undergoes corrections due to the Russia-Ukraine crisis, NFTs have shown better performance when denominated on its preferred blockchain Ethereum.
Also read: Why are gold-backed cryptos gaining momentum?
Elaborating it in six index charts -- "NFT 500", the "Blue Chip-10" index, the "Social-100," the Art NFTs, the Social NFTs, and the Metaverse NFTs the Nansen report suggests that NFTs have given returns of 90.9% (YTD) when denominated in ETH and 35.9% (YTD) when denominated in US Dollar.
According to Nansen's NFT-500 data, the price of the NFTs showcases an inverse correlation with the spot prices of cryptos. According to the data calculated from January 1 till last month, the NFT 500 index showcases a -0.46 correlation coefficient with Bitcoin and 0.6 correlation with Ethereum. Describing the correlation theory, Nansen's report explains that the correlation coefficients 1 or more than 1 mean it has a positive correlation with the market, indicating that the variables are moving in lock stop. But correlation coefficients -1 show that the variables are moving in the opposite direction.
Also read: UMA, Waves, Terra, THORCHain, Anchor: Top performing crypto this week
So, if one was to compare the NFTs prices in dollars, its performance varies when it is priced in Ethereum. Nansen's research analyst Louisa Choe believes that this discrepancy is due to volatility. She further adds that it becomes a crucial factor for NFT investors to decide if their portfolio should be denominated in cryptocurrencies or dollars.
Conclusion
Nansen's report does offer food for thought for many market participants. One needs to bear in mind that cryptos are a volatile asset and one needs to tread carefully before making any investment decisions.
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