Nansen says Ethereum’s NFT sales have a negative impact on cryptocurrencies


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Nansen says Ethereum's NFT sales have a negative impact on cryptocurrenciesAlthough most cryptocurrencies have undergone major corrections in recent weeks, the NFT market has risen, gaining 90.9% y / y for ETH denominations and 35.9% y / y for USD denominations. In light of this observation, last month Nansen released six new NFT market tracking indices, suggesting a negative correlation between ETH-based NFT and cryptocurrencies.

NFT surpasses cryptocurrency markets

Six indices developed by Nansen divide the market into relevant sections: the NFT 500 (similar to the S&P 500), the Blue Chip-10 index (the ten most noteworthy “and” classic “NFT collections by market capitalization),” Social – 100 “, which includes NFT and other three NFT indexes known as profile photos such as Bored Ape Yacht Club and World of Women,” Art “,” Social “and” Metaverse “.

Using these followers, Nansen collected various correlations between different NFT collections and the wider digital asset market.

The data show that, despite everything, the NFT market is rising sharply, while the broader cryptocurrency market is losing.

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Another interesting finding from Nansen’s NFT-500 data is that the price of NFTs, expressed in Ethereum, is inversely correlated with cash market cryptocurrency prices.

NFT's relationship with other assets.  Source: Nansen
NFT’s relationship with other assets. Source: Nansen

The data provided by Nansen show that the NFT 500 index (like ETH) has a correlation coefficient of -0.46 with Bitcoin. The same index has a correlation coefficient of -0.6 with Ethereum (also converted to ETH), which means that it rises when losing the largest cryptocurrencies.

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In the measurement of correlation coefficients, “1” means a direct positive correlation, ie two variables move in a single way. The opposite is true for the coefficient “-1”, ie both variables move in opposite directions.

– There is a positive correlation between BTC and ETH for NFTs denominated in US dollars. The reason for this discrepancy is primarily variability – This was reported by Nansen.

– When NFTs are valued in US dollars, their performance varies significantly due to the volatility of the ETH / USD exchange rate. Nansen analyst Louisa Choe added.

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– This can be an important factor for investors when deciding whether to portfolio denomination in cryptocurrencies or fiat currencies. – He finished.

Nanse’s NFT-500 data (expressed in Ethereum) also shows a strong inverse correlation with the lesser-known decentralized financial (DeFi) tokens listed in Bankless’s DeFi Innovation Index.

Which NFT collections got the best results?

The best departments were NFT tokens and social tokens. A Chainalysis analysis published earlier this year puts the market capitalization at about $ 41 billion, and Nansen says social tokens alone are $ 12.8 billion, or about 30 percent of that amount.

Art NFT has earned 191.8% (in ETH) and 108.1% (in USD) since the beginning of the year.

During the same period (until February 28, 2022), the Social-100 Index gained 114.8% (ETH) and 53.2% (USD).

In terms of daily variability, the Art NFT metric, which measures the average difference between the rate of return on a given day and the average rate of return over a period, performed better, showing daily variability of 36% (ETH) and 37.3%. (USD), metaverse and social tokens, which are significantly less volatile, performed well below 10% in all variability denominations.

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