Explaining Sales Concentration in the NFT Art Market: Trading Price, Market Activity, and Changing User Composition

초록

In the years following the emergence of the NFT art market, there has been growing enthusiasm and skepticism regarding its potential as a competitive alternative that addresses significant disparities prevalent in the conventional art world. By identifying patterns and driving forces behind sales concentration, this paper aims to present a preliminary assessment of the NFT art market as a viable alternative market model. Building on behavioral theories of economic action, we propose that under high levels of market uncertainty and product ambiguity, participants tend to rely on information heuristics continuously generated through complex interactions among market participants. Utilizing data from a leading NFT art platform, we empirically investigate the influence of endogenous factors such as overall trading price, the level of market activity, and changing user composition, as well as the impact of cryptocurrency prices. We observed a general declining trend in sales concentration,coupled with notable periodic fluctuations. Our multivariate time-series analyses reveal that sales concentrations at the token, creator, and collector levels are influenced not only by changes in Ethereum prices but also by endogenous factors like average trading price and the influx of new participants. Furthermore, the study highlights a notable negative feedback loop between sales concentration and average trading prices, suggesting that sales concentration and trading prices suppress, rather than reinforce, each other, thereby heightening market volatility. While the NFT art market is still in its formative stage, our study provides initial insights into its dynamic characteristics and potential as a viable art market model.

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