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Price determinants of non-fungible tokens in the digital art market

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  • Horky, Florian
  • Rachel, Carolina
  • Fidrmuc, Jarko

Abstract

While the traditional art market stagnates, the digital art market is booming partially due to its connection with non-fungible tokens, which allow any unique goods to be mapped in a digital environment. Using unique individual data from the online art NFTs marketplace SuperRare, we combine econometric tools with recent machine learning approaches. This approach allows us to define explanatory variables out of the NFTs descriptions for our Hedonic pricing approach. Using these variables, we are able to show that our Hedonic pricing models exhibit relevant informational value for NFTs prices. Moreover, we show that NFTs cannot be viewed as a simple derivative of cryptocurrencies.

Suggested Citation

  • Horky, Florian & Rachel, Carolina & Fidrmuc, Jarko, 2022. "Price determinants of non-fungible tokens in the digital art market," Finance Research Letters, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:finlet:v:48:y:2022:i:c:s1544612322002495
    DOI: 10.1016/j.frl.2022.103007
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    References listed on IDEAS

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    15. Matthieu Nadini & Laura Alessandretti & Flavio Di Giacinto & Mauro Martino & Luca Maria Aiello & Andrea Baronchelli, 2021. "Mapping the NFT revolution: market trends, trade networks and visual features," Papers 2106.00647, arXiv.org, revised Sep 2021.
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    Cited by:

    1. Umar, Zaghum & Usman, Muhammad & Choi, Sun-Yong & Rice, John, 2023. "Diversification benefits of NFTs for conventional asset investors: Evidence from CoVaR with higher moments and optimal hedge ratios," Research in International Business and Finance, Elsevier, vol. 65(C).
    2. Mingxuan He, 2023. "Deep Learning for Dynamic NFT Valuation," Papers 2312.05346, arXiv.org.
    3. Zhang, Luyao & Sun, Yutong & Quan, Yutong & Cao, Jiaxun & Tong, Xin, 2023. "On the Mechanics of NFT Valuation: AI Ethics and Social Media," OSF Preprints qwpdx, Center for Open Science.
    4. Oana Marin & Tudor Cioara & Liana Toderean & Dan Mitrea & Ionut Anghel, 2023. "Review of Blockchain Tokens Creation and Valuation," Future Internet, MDPI, vol. 15(12), pages 1-27, November.
    5. Ewelina Plachimowicz & Piotr Wójcik, 2022. "What makes Punks worthy? Valuation of Non-Fungible Tokens based on the CryptoPunks collection using the hedonic pricing method," Working Papers 2022-27, Faculty of Economic Sciences, University of Warsaw.
    6. Wang, Yizhi, 2022. "Volatility spillovers across NFTs news attention and financial markets," International Review of Financial Analysis, Elsevier, vol. 83(C).
    7. Nguyen, Jeremy K., 2022. "Racial discrimination in non-fungible token (NFT) prices? CryptoPunk sales and skin tone," Economics Letters, Elsevier, vol. 218(C).
    8. Dulani Jayasuriya & Alexandra Sims, 2023. "Not So New Kid on the Block: Accounting and Valuation Aspects of Non-Fungible Tokens (NFTs)," JRFM, MDPI, vol. 16(11), pages 1-24, October.
    9. Jan Schwiderowski & Asger Balle Pedersen & Jonas Kasper Jensen & Roman Beck, 2023. "Value creation and capture in decentralized finance markets: Non-fungible tokens as a class of digital assets," Electronic Markets, Springer;IIM University of St. Gallen, vol. 33(1), pages 1-16, December.
    10. Fridgen, Gilbert & Kräussl, Roman & Papageorgiou, Orestis & Tugnetti, Alessandro, 2023. "The fundamental value of art NFTs," CFS Working Paper Series 709, Center for Financial Studies (CFS).

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    More about this item

    Keywords

    Digital art; Non-fungible tokens; Hedonic prices; Lasso regression;
    All these keywords.

    JEL classification:

    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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