NFT Indexes Quarterly Report - Q1 2022

This report provides an overview of the insights gathered through the rebalancing of the NFT indexes.

Table of Contents

Text Link

Summary

Nansen’s Non-Fungible Token (NFT) Index’s Methodology was first conceptualized in late December 2021 and was later formalized in January 2022. In February, we launched six indexes as meaningful instruments to track the movement of the broad NFT market (NFT-500) and its respective market segments: Blue Chip-10, Social-100, Game-50, Art-20 and Metaverse-20. At the end of March 2022, Nansen rebalanced these indexes. This rebalancing activity ensured that the index constituents met liquidity and quality criteria (read about our Index Methodology here). Additionally, we used this as an opportunity to review our labels to verify that index constituents are accurately classified. This report provides an overview of the insights gathered through the rebalancing of the indexes.

Key insights:

  • Azuki, Clone X and Doodles have been added to the Nansen Blue Chip-10 index due to the tremendous growth in their market capitalization. 
  • The NFT market continues to outperform the cryptocurrency market year-to-date, with the year-to-date return for NFT-500 (ETH)  at 49.9% and NFT-500 (USD) at 37.7%.
  • After the rebalancing of the Nansen-500 (ETH) index, we saw an increase in Social NFTs while the weight of other NFT types such as Game, Art and Metaverse decreased. 
  • Metaverse NFTs led the market during Q1 2022, tracking a year-to-date performance of 130.9% when denominated in ETH and 112% when denominated in USD.
  • In Q1, Blue Chip NFTs were the least volatile, while Metaverse NFTs was the most volatile NFT market segment.

Insights derived from the rebalancing of Nansen indexes

Trends in NFT Sub-sectors

Performance of different NFT sectors according to Nansen NFT Indexes

NFT-500 index

Year-to-date, the NFT-500 index tracked a return of 49.9% when denominated in ETH and 37.7% when denominated in USD. When rebalancing the NFT constituents of the index, we noted a decrease in the weighting of the Metaverse and Gaming NFTs in the NFT-500 (ETH) index, while there was a slight increase in Social NFTs’ weighting in the index. The Nansen NFT indexes are weighted by market capitalization denominated in ETH. 

The Blue Chip-10 index

Market capitalization movement is an influential factor in deciding whether an NFT collection gets selected to be part of the Nansen Blue Chip-10 index. For this rebalance, the tremendous growth in the market capitalization of Azuki, Clone X, and Doodles have these collections to be included as part of the Blue Chip-10 index. On the other hand, Bored Ape Kennel Club, CyberKongz and Pixel Vault Founders DAO have been removed from the Blue Chip-10 index.

The Blue Chip-10 index has returned 42.4% year-to-date when denominated in ETH and 30.7% when denominated in USD. 

Social-100 index

The make-up of the Social-100 index remains relatively similar before and after the index was rebalanced. However, we saw a slight increase in the weighting of Access & Membership NFTs and Utility NFTs.

The Social-100 index returned a 49.9% increase year-to-date when denominated in ETH and 37.5% when denominated in USD. 

Gaming-50 index

In March, we saw a rise in Game-Fi related NFT constituents as part of the Nansen Gaming-50 index. This increase in GameFi NFTs’ weighting came with the decrease in the weightings of Play-to-Earn (P2E) NFTs and Role Playing Game (RPG) NFTs. However, P2E NFTs still dominated the Gaming NFT sector.

The Gaming-50 (ETH) index saw the biggest drop in performance year-to-date when compared to other NFT sectors, with a decline of -24.4%, and -30.6 when denominated in USD.

Art-20 index

The Art-20 (ETH) index saw a decline in Art NFTs’ prices year-to-date, with the Art-20 index seeing a drop of -5.5% when denominated in ETH and -13.2% when denominated in USD. Between March and April, the Art-20 index saw a growth in the weighting of Digital Art NFTs, while there was a slight decline in the value of Generative Art NFTs. 

Metaverse-20 index

The Metaverse-20 index demonstrated that the Metaverse NFTs led the market year-to-date with a return of 130.9% when denominated in ETH and 112% when denominated in USD. Comparing the index before and after the rebalance, we noted a slight decrease in the weighting of Land & Real-estate NFTs, while Avatar and Utility NFTs’ weighting have increased.

Market Interpretation

1. The NFT market continues to outperform the cryptocurrency market year-to-date.

Performance of NFT market and other assets.

Asset/Index YTD Performance (ending 31 March 22) 30 Day performance (ending 31 March 22)
NFTs (Nansen NFT-500:ETH) 49.9% 5.9%
Bitcoin (XBX) 1.9% 9.0%
Ether (ETX) -7.9% 15.8%
Crypto Large Cap (DLCX) -2.7% 11.9%
DeFi (GMI) -43.4% 5.21%
SnP 500 -4.95% 0.28%
Gold 6.66% 7.13%

Towards the end of February 2022, we witnessed a downturn in the global markets across most asset classes. As with the broad market, the NFT market also experienced a correction in February, with. However, in the last 30 days, we saw a slight reversal in this downward trend, with the NFT-500 (ETH) increasing 5.9% in March. The NFT market continues outperforming the cryptocurrency market year-to-date with a 49.9% year-to-date return when denominated in ETH.

2. NFT-500 (ETH) remains uncorrelated with other assets. 

In an interim analysis we did at the end of February, the Nansen NFT-500 (ETH) index had a notable inverse relationship with the Decentralized Finance (DeFi) cryptocurrency sector. However, the correlation has weakened over time. In the last 90 days, the NFT-500 (ETH) appears to be relatively uncorrelated to other cryptocurrencies.

3. Blue Chip NFTs are the least volatile, while Metaverse NFTs are the most volatile NFT market segment.

During Q1 2022, the Nansen NFT-500 (ETH)’s volatility was 2.4 %. When analyzing the volatility of the individual sectors, we noted that the the volatility of the respective NFT sectors differed largely. 

NFT Categories/Indexes Index Denominated in ETH Daily Volatility (ending 31 March 22)
Nansen NFT 500 2.4%
Nansen Blue Chip-10 2.4%
Nansen Social-100 2.6%
Nansen Game-50 3.5%
Nansen Art-20 7.9%
Nansen Metaverse-20 9.4%

When compared to our interim analysis, our initial findings revealed that Gaming NFTs were the least volatile, while Art NFTs are the most volatile. However, with additional data from March, we found that Blue Chip NFTs are now the least volatile, followed by Social NFTs. On the other hand, Metaverse and Art NFTs are the most volatile segment of the NFT market during the observed period. The volatility of Metaverse NFTs is largely due to the price of Asset-typed Metaverse NFTs such as SandBox Assets. Given the diverse range and types of Metaverse Asset NFTs, evaluating the prices of these NFTs is challenging. Similarly, the relative illiquid nature of Art NFTs also lead to asymmetric price information within the market, which could be a contributing factor to its volatility. As a result, evaluating these NFTs can sometimes present a wicked problem, especially those pieces that are rare. Many of these market participants, thus, behave as speculators. 

Concluding comments

NFTs represent a segment of the cryptocurrency market that is fast-growing and dynamic, and this is especially the case for retail investors. However, for NFT market participants looking to collect, trade, or invest in NFTs, it is imperative to understand the competitive NFT market landscape.

With the Nansen Social-100 NFT index leading in year-to-date returns, it signals that, perhaps, a broad strategy that includes a wide array of collections may be beneficial in returning profits. It is, however, important for market participants to undertake sufficient due diligence when investing.

We look forward to our next rebalancing on the Nansen indexes to see how the NFT market evolves as more artists, creators, builders and community members innovate with the NFT market. To learn more about the Nansen NFT indexes and how the depth of categorization can serve as signals for users, please read our Index Methodology paper and the Nansen NFT Indexes dashboard. 

Join 100,000+ Investors Getting Their Trading Edge From Nansen