What’s the Co-relation Between Ethereum NFTs And the Crypto Markets?

Paigambar Mohan Raj
Source: Linedata

Nansen, a crypto analytics firm, issued six new indices for analyzing the NFT market last month. According to the Nansen research, NFTs may be a haven from volatile cryptocurrencies if they’re denominated in Ethereum.

The most current research reveals some startling findings based on this set of indexes.

The “NFT 500” (similar to the S&P 500), the “Blue Chip-10” index (the ten largest “notable” and “classic” NFT collections by market cap), the “Social-100,” which includes popular profile picture NFTs like Bored Ape Yacht Club or World of Women, and three other indexes for “Art,” “Social,” and “Metaverse” NFTs, are among the six indexes.

Source: Nansen

Nansen has compiled several correlations between various sorts of NFT collections and the broader crypto market using these trackers. 

Ethereum based NFT and their inverse co-relation to the crypto market

To begin with, NFTs have been the most bullish subgroup of cryptocurrency. While other crypto markets have recently seen a significant downturn, NFTs have outperformed with a year-to-date (YTD) performance of 90.9% when denominated in Ethereum (ETH) and 35.9% when denominated in USD. 

According to CoinMarketCap, Bitcoin has plummeted around 17% and Ethereum has dropped more than 31% since January 1, the period under issue. 

Whatever way you look at it, NFTs are gaining ground this year while cryptocurrencies have been losing ground.

Another interesting finding from Nansen’s NFT-500 data for the year so far is that the price of NFTs shows an inverse correlation with spot crypto prices when denominated in Ethereum (ETH).

When looking at the price of NFTs in dollar denominations, however, a positive link between the two assets appears. The main explanation for the disparity, according to Nansen, is volatility.

The data from Nansen’s NFT-500 index (in Ethereum) also indicates a strong inverse association with the lesser-known decentralized finance (DeFi) tokens included in Bankless’s DeFi Innovation Index. 

DeFi token dollar values are often lower when the Ethereum price of NFTs is high. Bankless’ index, it should be added, tracks “promising early-stage DeFi projects that aren’t yet labeled ‘blue chip.’

Non-fungible art and social tokens are the best-performing divisions in this group. According to research provided by Chainalysis at the beginning of the year, the market is worth about $41 billion, with social tokens accounting for $12.8 billion, or roughly 30% of that.