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What makes Punks worthy? Valuation of Non-Fungible Tokens based on the CryptoPunks collection using the hedonic pricing method

Author

Listed:
  • Ewelina Plachimowicz

    (University of Warsaw, Faculty of Economic Sciences)

  • Piotr Wójcik

    (University of Warsaw, Faculty of Economic Sciences)

Abstract

This article focuses on an attempt to value Non-Fungible Tokens from the CryptoPunks collection. Based on the data from January 2021 to July 2021, a hedonic pricing model was built, based on the transaction history and characteristics of a given NFT, as well as external markets variables - cryptocurrency prices (Bitcoin and Ethereum), natural gas prices and the popularity of the collection in social media (Twitter). According to the literature, we decided to build three regression models: Ordinary Least Squares model, XGBoost algorithm and bidirectional Long Short-Term Memory Model. Based on the results, we were able to prove that such complex issues as NFT valuation require more advanced methods than the classical regression model. In addition, we proved that one of the most important categories of variables in the case of NFT valuation is the history of token sales and its characteristics, indicating a particular rarity. Moreover, we have shown that the cryptocurrency and natural gas market is not an important factor in the NFT valuation. Finally, we proved that the increase in the popularity of tokens in social media translates into an increase in NFT prices, and this is an important element when trying to valuate tokens.

Suggested Citation

  • Ewelina Plachimowicz & Piotr Wójcik, 2022. "What makes Punks worthy? Valuation of Non-Fungible Tokens based on the CryptoPunks collection using the hedonic pricing method," Working Papers 2022-27, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2022-27
    as

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    File URL: https://www.wne.uw.edu.pl/download_file/2251/0
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    NFT; Non-Fungible Token; pricing; valuation; luxury goods; cryptocurrencies;
    All these keywords.

    JEL classification:

    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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