Background and Motivation
The non-fungible token (NFT) marketplace has experienced explosive growth, emerging as a significant yet volatile digital asset class. However, the complex network of risk interdependencies among major NFT assets remains poorly understood. This research addresses a critical knowledge gap by investigating how systemic risks propagate through the NFT ecosystem, providing much-needed insights for investors and regulators navigating this rapidly evolving market.
Methodology and Scope
The study employs a sophisticated quantile vector autoregression (QVAR) approach to analyse eight bellwether NFT assets. Through static quantile connectedness matrices, directional connectedness heatmaps, and quantile-on-quantile matrices, the research unpacks the asymmetric, state-dependent spillovers between assets across different market conditions, offering a comprehensive view of risk transmission mechanisms within the NFT landscape.
Key Findings and Contributions
The analysis reveals that NFT assets demonstrate moderate but significant interconnectedness during normal market conditions, which intensifies substantially during extreme market states. This pattern indicates heightened vulnerability to event-driven volatility cascades. The research also identifies frequent role reversals among NFT assets, with individual tokens alternating between being transmitters and receivers of volatility depending on market conditions. Most notably, the study documents asymmetric spillovers that become particularly pronounced when asset pairs occupy extreme opposite quantiles.
Why It Matters
This research provides the first granular examination of systemic risk dynamics in the NFT marketplace, challenging conventional assumptions about risk isolation in digital assets. The findings demonstrate that NFT markets exhibit sophisticated interdependencies that amplify during stress periods, necessitating more sophisticated risk management approaches for this emerging asset class.
Practical Applications
Discover high-quality academic insights in finance from this article published in China Finance Review International . Click the DOI below to read the full-text original!
China Finance Review International
News article
Interpreting the NFT marketplace a quantile analysis of connectedness across major digital assets
31-Jul-2025