Animation, music and inside information: Here’s what makes some NFT drops more successful than others, according to a new study
Have you ever wondered what makes a successful NFT fall? Is it sales? Celebrity influence? A popping rift? You are definitely not alone.
A team of researchers from Temple University and the University of Chicago sought to isolate what separates a successful fall from a failed one, by looking at a wide range of factors, from floor price to volume, for a study published in February.
The researchers divide 300,000 NFT wallets into two separate groups, experienced traders and new ones, using publicly available information from OpenSea, the world’s largest NFT marketplace, which offers popular collections such as CryptoPunks and Bored Ape Yacht Club.
The study’s three authors analyzed data from 692 individual NFT collections to determine the qualities that play a role in price growth in both the primary and secondary markets.
Perhaps unsurprisingly, they found that experienced investors earn on average 10 percent more per trade, as “collections with higher experienced investor participation are more likely to strike out, strike out faster and experience higher coin price growth.”
To explain this, the research narrowed down to the specific factors related to the success of individual NFTs. Do they have a road map (a set of clear goals and milestones)? A website? Are the founders on Twitter? Disagreement?
They found that projects with roadmaps were 8.5 per cent less likely to be sold out, despite the fact that after seven days they were up an average of 9.8 per cent from the original coin price. After 28 days, NFTs with published roadmaps were down an average of 5 percent from the original coin price, probably due to what researchers speculated was widespread, as well as over promising and during delivery.
The report also found that derivative NFTs, projects that use the creative assets and intellectual property rights of existing NFTs, were also much less likely to succeed. They found that derivative NFTs were down an average of 65.8 percent from the coin price after 28 days. The one notable exception, according to the report, was derived NFTs based on the Bored Ape Yacht Club series, which were up 1256 percent during the 28 days after the mint.
Perhaps the most surprising conclusion the researchers found was that 3D art did not correspond to any meaningful economic success in individual NFTs. They found that 3D art collections were on average 2.2 percent more likely to be sold out, but that after 28 days they were down 23 percent from the original coin price.
Conversely, the study found that NFTs that included animations and music were much more likely to be successful. Animated projects were on average 5.3 percent more likely to be sold out, while projects that contained music were 7.7 percent more likely to be sold out. Animated projects had an average return of 38 percent 28 days after performance, while those that included music had an average increase of 71.5 percent.
In terms of social media, the report found that collections promoting the Twitter profiles of their founders were 6.1 percent more likely to be sold out, increasing by an average of 72.2 percent in the 28 days after release.
Traders with more experience also received 43.5 percent higher returns when they traded the same collection as those with less experience, the study said, along with an average 39.5 percent higher return when they traded the exact same NFT.
The researchers speculated that this is probably due to the fact that experienced traders hold their NFTs for a much shorter time: “Experienced investors tend to sell NFTs that do well, while inexperienced investors tend to hold on to them. , “the study found.
Overall, “the results suggest that NFT markets are characterized by high levels of information inefficiency,” the report concludes, “which allows investors with information benefits to systematically extract profits.”
A caveat is that the study was published in February, at the top of the NFT market. In January, NFT sales amounted to $ 4.5 billion, just below the market all-time high of 4.9 billion dollars, set in August 2021. Since then, the market has been in free fall with floor prices plummeting and large NFT collections have placed considerable emphasis.
This means that when times are good, those who have access to information, data and can follow the patterns of experienced NFT traders are much more likely to succeed in buying and selling non-fungible tokens. When times are bad? Fasten.
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