Unpacking the financial attributes of blue-chip non-fungible tokens (NFTs) against traditional and digital assets

Abstract

PurposeThis study aims to identify the financial attributes of non-fungible tokens (NFTs) as safe havens, hedges or diversifiers against traditional (stock indices, foreign exchange, gold and government bonds) and digital (Bitcoin and Ethereum) assets.Design/methodology/approachThe quantile via moments was utilized, and the data spanned from 20 September 2021 to 31 January 2022. The authors incorporated feasible generalized least squares (FGLS) and difference-generalized method of moments (diff-GMM) as the robustness check.FindingsOverall, NFTs offer strongly safe havens, hedging and diversifier attributes against cryptocurrencies, while weak properties for traditional assets. The specific findings are: (1) Bored Ape Yacht Club (BAYC) serves as a strong hedge for Bitcoin during market rise; (2) Mutant Ape Yacht Club (MAYC) serves as a strong safe haven against Bitcoin during market bull; (3) Crypto punk (CP) provides strong safe havens properties for gold during market turmoil while serving as a strong hedge against gold and Bitcoin on average and (4) the three blue-chip NFTs are powered by Ethereum blockchain, thus serving as a diversifier against Ethereum.Practical implicationsBitcoin investors are suggested to include NFTs in their investment portfolio to mitigate the losses when Bitcoin falls. Meanwhile, the inclusion of crypto punk is advised for risk-averse investors who invest in gold. NFTs are powered by the Ethereum blockchain, indicating co-movement among them and thus, serve as diversifiers. Policymakers and regulators are suggested to watch closely over NFTs' great development and restructure the existing policies and thus, stabilization of asset markets can be achieved.Originality/valueThe originality aspects are: (1) focusing on the three blue-chip NFTs (i.e. BAYC, MAYC and CP) that are categorized as the largest NFTs by floor market capitalization; (2) testing the NFT attributes (safe havens, hedges or diversifiers) against traditional and digital assets, a.k.a., cryptocurrencies and (3) panel setting on 14 countries with the highest NFT users.