Major cryptocurrencies continue to fall as we approach the end of January. The market as a whole has lost almost $1 trillion since its peak in November 2021. Clearly, 2022 has not been kind. In contrast, NFT prices continue to soar, breaking countless records. This begs the question: are NFT prices and the crypto market actually correlated?
During the past few months, the NFT space has seen exponential growth. For example, BAYC and World of Women continue to have higher floor prices, not to mention unexpected winners like Ghozali Everyday and IreneDAO achieving multi-million dollar transaction volumes. In addition, this contrasting event can also be seen in Q2 of 2021 when NFTs remained bullish despite the crypto crash.
Crypto assets are volatile due to a myriad of factors, different from those surrounding the NFT space. Adam Levy listed 6 factors that affect crypto prices, such as supply and demand, cost of production, availability, competition, governance, and regulation. For instance, a selloff among tech stocks can easily spread fear in the crypto markets.
On the other hand, several different factors have contributed to the current boom in NFTs. This includes an increase in public awareness, celebrity involvement, improving technology, and others. Of course, these factors are not constant and may quickly change if a general bearish sentiment sets in the space.
Ultimately, both digital assets will definitely correlate to a certain extent. However, this depends on which perspective you are taking. For instance, Axie prices have seen a steady downtrend since mid-2021. The poor performance of its in-game currency, SLP, is said to have caused the slide in its NFTs. This shows a clear correlation between crypto and NFT prices.
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