The impact of media coverage on the market for non-fungible tokens (NFT).
Non-fungible tokens (NFTs) have recently received an influx of media attention, but little research has been done on the impact of this attention on the NFT market, which is still in its infancy. Dr. Sean Wilkoff and Dr. Serhat Yildiz, assistant professors at the University of Nevada, Reno College of Business, worked with Dr. Joshua T. White, assistant professor at Vanderbilt University, to investigate how this media attention affected the NFT market.
“One thing you look for as a researcher is a new laboratory to research,” Wilkoff said. “The NFT market has all the characteristics of a speculative market, and little research was done on it. It was very much a ‘right place, right time’ type.”
The data for the NFT market, like any cryptocurrency, is on a blockchain, which means that anyone can access transaction information, making the market relatively transparent. The researchers found a computer company that had already collected the raw data, which made it possible for them to analyze the effect of media on the NFT market.
They expected their research to reflect the findings of similar stock market research, which found that the media tended to oversell the benefits of an investment without warning of potential risks, leading to market hype and increasing volatility and returns. . Volatility describes the size of the risk the investor takes. High volatility gives the chance for a massive gain or loss, as the difference between the original investment price and the final price can vary widely.
However, the data showed a surprising conclusion – a connection between the news media that published articles about NFTs and an increase in the number of market participants, traders and NFT creations, which suggests that the media influenced the NFT market. They also found a decline in volatility and returns with an increase in media attention, suggesting that the media educated investors instead of hyping the market.
“I was surprised,” Wilkoff said. “My instinct was that the news generally creates hype, as seen with the stock market, so I thought the results would be similar, especially since we were looking at a speculative market.”
Wilkoff noticed that the NFT market differs from the stock market in some ways. Shares are fungible, which means that two shares of the same share are exchangeable, while each NFT is unique and irreplaceable. Since the NFT market is relatively new and not regulated as strongly as the stock market, it also experiences market manipulation and investors are exposed to fraud. In addition, the NFT market is speculative, which means that it can fluctuate rapidly, allowing for quick gains or sudden losses.
“NFTs are a gamble,” Wilkoff said. “Do not invest what you can not afford because the market may disappear tomorrow.”
