The Economics of Non-Fungible Tokens

We construct a comprehensive dataset on a near universe of non-fungible token (NFT) transactions, create indices for the NFT market and its components, and analyze their properties. The NFT market return is significantly exposed to the cryptocurrency market return, but the majority of the NFT market variations remain unexplained. NFT market returns have low exposures to other cryptocurrency factors and factors from traditional asset markets. In the time-series, volatility and the NFT valuation ratio significantly predict NFT market returns. In the cross-section, NFT returns exhibit size and return reversal effects.