Non‐Fungible Tokens (NFTs): A Review of Pricing Determinants, Applications and Opportunities

Abstract

This paper provides a review of the development of the non‐fungible tokens (NFTs) market, with a particular focus on its pricing determinants, its current applications, and its future opportunities. We investigate the current state of the NFT markets and highlight the perception and expectations of investors toward these products. We summarize and compare the financial and econometric models that have been used in the literature for the pricing of non‐fungible tokens with a special focus on their predictive performance. We design a framework that can help to understand the price formation of NFTs. We further aim to shed light on the value‐creating determinants of NFTs in order to better understand investors’ behavior on the blockchain.

Market Manipulation in NFT Markets

“…This paper adds to the existing literature on NFT markets and equity crowdfunding, specifically addressing market structure and the potential for manipulation. For a discussion of NFT markets from finance perspective, Kräussl and Tugnetti (2022) provided an overview of NFT markets and summarizes the pricing methods of other papers. Oh, Rosen, and Zhang (2022) compared the returns of experienced and inexperienced investors, Bao, Ma, and Wen (2022) examined herding behaviors and found inexperienced investors' entering can be a trigger of herding, Borri, Liu, and Tsyvinski (2022) and Kong and Lin (2022) attempted to construct market indices and conduct related analysis.…”