A non-fungible token (NFT) is a way to record, verify and track on a blockchain ownership of a unique physical or digital asset such as a work of art, a futures contract, a music score, a book or real estate. Are assets related to trading of NFTs good investments? In the October 2021 version of his paper entitled "Non-Fungible Tokens (NFT). The Analysis of Risk and Return", Mieszko Mazur examines risk and return characteristics of 22 NFT-focused assets listed on Binance, with emphasis on the 19 with at least one month of history. He first classifies these assets into blockchain, gaming, music, media, decentralized finance (DeFi) and "other" categories. He then looks at their listing-day and longer term returns, volatilities and annualized Sharpe ratios (assuming a zero risk-free rate). He employs bitcoin as a "market" benchmark. Using daily returns for the specified 22 NFT-focused assets as available during mid-April 2019 through August 2021, he finds that:
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