Determinants of Non-Fungible Tokens Collection Market Activity in the Post-Pandemic Period

Abstract

PurposeAs an emerging technological and financial asset, non-fungible tokens (NFT) have yet to be completely understood and, owing to bubble-like behavior along with pandemic effects, literature has mostly focused on pricing mechanisms and spillover effects between cryptocurrency and NFTs.This work aims to determine the significant determinants of trading activity in NFT collections quantified by the number of transactions as a means to characterize NFTs investors behaviours. Design/methodology/approachNFTs collection-week data from the Ethereum blockchain were scraped.Together with collection-specific features, we employ factor analysis and rich regression estimation to identify the factors that are significantly correlated to trading activity. FindingsOur results, consistent across the different models and methodologies, indicate that the historical transaction and pricing as well as Ethereum market activity are the important determinants of NFTs trading activity.Certain collection-specific properties also show significant relationship with NFTs trading activities, such as age, size, creators commision, collection attention, and utility. Research limitations/implicationsOur work calls for more studies to fully understand the effect of wash trades and on NFT market activity. Practical implicationsOur results give recommendations to NFT investors and can guide them in performing sensible investment decisions at the level of selecting potential liquid and valuable collections.Given NFTs trading activity closely associate with NFTs market liquidity, understanding the determinants of NFTs trading provide important implications for preventing market failure.