IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2204.10243.html
   My bibliography  Save this paper

Heterogeneous rarity patterns drive price dynamics in NFT collections

Author

Listed:
  • Amin Mekacher
  • Alberto Bracci
  • Matthieu Nadini
  • Mauro Martino
  • Laura Alessandretti
  • Luca Maria Aiello
  • Andrea Baronchelli

Abstract

We quantify Non Fungible Token (NFT) rarity and investigate how it impacts market behaviour by analysing a dataset of 3.7M transactions collected between January 2018 and June 2022, involving 1.4M NFTs distributed across 410 collections. First, we consider the rarity of an NFT based on the set of human-readable attributes it possesses and show that most collections present heterogeneous rarity patterns, with few rare NFTs and a large number of more common ones. Then, we analyze market performance and show that, on average, rarer NFTs: (i) sell for higher prices, (ii) are traded less frequently, (iii) guarantee higher returns on investment (ROIs), and (iv) are less risky, i.e., less prone to yield negative returns. We anticipate that these findings will be of interest to researchers as well as NFT creators, collectors, and traders.

Suggested Citation

  • Amin Mekacher & Alberto Bracci & Matthieu Nadini & Mauro Martino & Laura Alessandretti & Luca Maria Aiello & Andrea Baronchelli, 2022. "Heterogeneous rarity patterns drive price dynamics in NFT collections," Papers 2204.10243, arXiv.org, revised Aug 2022.
    • Handle: RePEc:arx:papers:2204.10243
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2204.10243
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Koford, Kenneth & Tschoegl, Adrian E., 1998. "The market value of rarity," Journal of Economic Behavior & Organization, Elsevier, vol. 34(3), pages 445-457, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ghazi, Soroush & Schneider, Mark, 2024. "Market value of rarity: A theory of fair value and evidence from rare baseball cards," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 318-339.
    2. Niklas Konstantin Klein & Fritz Lattermann & Dirk Schiereck, 2023. "Investment in non-fungible tokens (NFTs): the return of Ethereum secondary market NFT sales," Journal of Asset Management, Palgrave Macmillan, vol. 24(4), pages 241-254, July.
    3. Fridgen, Gilbert & Kräussl, Roman & Papageorgiou, Orestis & Tugnetti, Alessandro, 2023. "The fundamental value of art NFTs," CFS Working Paper Series 709, Center for Financial Studies (CFS).
    4. Mingxuan He, 2023. "Deep Learning for Dynamic NFT Valuation," Papers 2312.05346, arXiv.org.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eric Fur, 2023. "Risk and return of classic car market prices: passion or financial investment?," Journal of Asset Management, Palgrave Macmillan, vol. 24(1), pages 59-68, February.
    2. Dieter Pennerstorfer & Nora Schindler & Christoph Weiss & Biliana Yontcheva, 2020. "Income Inequality and Product Variety: Empirical Evidence," Economics working papers 2020-17, Department of Economics, Johannes Kepler University Linz, Austria.
    3. Pecchioli, Bruno & Moroz, David, 2023. "Do geographical appellations provide useful quality signals? The case of Scotch single malt whiskies," Economic Modelling, Elsevier, vol. 124(C).
    4. Caballer Mellado, V. & De La Poza, E., 2010. "La Numismática como objeto de inversión y valoración/Numismatics as an object of investment and valuation," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 28, pages 475(22á.)-4, Agosto.
    5. Dobrynskaya, Victoria & Kishilova, Julia, 2022. "Lego: The Toy Of Smart Investors," Research in International Business and Finance, Elsevier, vol. 59(C).
    6. McClure, James & Kumcu, Erdogan, 2008. "Promotions and product pricing: Parsimony versus Veblenesque demand," Journal of Economic Behavior & Organization, Elsevier, vol. 65(1), pages 105-117, January.
    7. Apostolou, Menelaos, 2011. "Why men collect things? A case study of fossilised dinosaur eggs," Journal of Economic Psychology, Elsevier, vol. 32(3), pages 410-417, June.
    8. Fur, Eric Le, 2021. "Fine Wines in a Diversified Portfolio of Collectibles," 2021 Conference, August 17-31, 2021, Virtual 315852, International Association of Agricultural Economists.
    9. repec:dau:papers:123456789/5855 is not listed on IDEAS
    10. Lin, Min-Bin & Wang, Bingling & Bocart, Fabian Y.R.P. & Hafner, Christian M. & Härdle, Wolfgang K., 2022. "DAI Digital Art Index : a robust price index for heterogeneous digital assets," LIDAM Discussion Papers ISBA 2022036, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    11. Ghazi, Soroush & Schneider, Mark, 2024. "Market value of rarity: A theory of fair value and evidence from rare baseball cards," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 318-339.
    12. Richard J. Agnello, 2002. "Investment Returns and Risk for Art: Evidence from Auctions of American Paintings," Eastern Economic Journal, Eastern Economic Association, vol. 28(4), pages 443-463, Fall.
    13. Yeonjoon Lee, 2022. "Measuring the impact of rarity on price: evidence from NBA Top Shot," Marketing Letters, Springer, vol. 33(3), pages 485-498, September.
    14. Kleine, Jens & Peschke, Thomas & Wagner, Niklas, 2021. "Collectors: Personality between consumption and investment," Journal of Behavioral and Experimental Finance, Elsevier, vol. 32(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2204.10243. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.