Cryptocurrency Spillover Effect on Non-Fungible Token Pricing

Abstract

The thesis is designated to understand if the pricing of Non-Fungible Tokens (NFTs) is affected by the volatility present in the cryptocurrency market. NFTs are digital assets such as art, music, videos, and virtual property, that are encoded with blockchain-traded rights and have in the recent one a half year seen a large increase in prices and popularity amongst investors. Since NFTs are closely related to the cryptocurrency market it is of interest to research how they might affect each other. Using a Vector Autoregressive model to derive a Spillover Index, an EGARCH model, a DCC-GARCH model and a Wavelet Coherence Model our conclusion is that volatility is present in both markets but that the volatility in the cryptocurrency market is of low or no importance in the pricing of NFTs.