The market for non-fungible tokens (NFTs) – although still in its infancy – appears to be “a relatively independent market” that does not necessarily move with the broader crypto market, according to crypto analysis firm Coin Metrics.
In their latest report, Coin Metrics noted that it is often thought that NFT trading volumes suffer when prices of ethereum (ETH) are rising, since most NFTs are bought and sold using ETH.
And while this appears to be the case during “some particularly extreme price swings,” the data still shows that no consistent correlation exists between the ETH price and sales volumes on the dominant NFT marketplace OpenSea, the analysts said.
Plotting ETH prices against OpenSea volumes shows that the two have often moved in opposite directions since the beginning of 2021, with at least three notable divergences occurring in May 2021, November 2021, and January 2022. However, the data also shows that ETH price and NFT volumes have sometimes moved in tandem, contrary to the commonly held belief that higher ETH prices are bad for NFTs.
“[…] at times they are highly correlated, like August 2021, but at other times they’re negatively correlated, like November 2021,” the analysts said.
They went on to conclude that the NFT market should be thought of as “relatively independent” from the broader crypto space, and that it “may for the most part move separately from the rest of the crypto market.”
Meanwhile, the report also touched on the large variations that exist within the digital art market, noting that some collections have seen “consistent success,” while others have gone through “big peaks and valleys.”
As examples, it mentioned the popular Bored Ape Yacht Club (BAYC) and Doodles collections as seeing “relatively consistent” price growth, while collections like Art Blocks Curated peaked during the so-called “JPEG summer” of 2021 and has yet to recover.
Across all NFT collections tracked, the report said that large sales have picked up this year although they still have yet to reach the levels from the height of the NFT craze in August 2021.