• The report by Nansen found that NFTs have been on the up since the year started, but only when they are denominated in Ethereum and not the U.S dollar.
• It also showed that NFTs are inversely correlated with lesser-known DeFi tokens, and the findings could have a great impact on investment strategies.

Nansen, a crypto and blockchain analytics company, has published a report that has given the clearest picture yet of the implications of NFTs to crypto traders. The report revealed that NFT prices have soared when the prices of most cryptos have taken a hit, indicating that the budding sector could be the best way to hedge your money during the bear market.

It started with Nansen launching six indexes that tracked the NFT market, sectioning it depending on the kinds of NFTs. The indexes included the Blue Chip 10 – which featured the ten biggest NFT collections by market cap -, the NFT 500 – which is kind of like the NFT version of the S&P 500 – and others.

The company then used these indexes to draw conclusions about the performance of the NFT market, and the results prove that this sector has been the most profitable this year.

From January 1 to date, NFTs recorded a 90.9 percent surge. Notably, this was only for NFTs denominated in Ether. Those that relied on US dollar denomination were up by less than half that at 35.9 percent.

This performance is commendable, especially given the performance of the overall crypto market. Year-to-date (YTD), Bitcoin has dipped by about 17 percent as the Ukraine-Russia conflict takes its toll on the top cryptocurrency, even as its status as a safe haven asset came into question. For Ether, the world’s biggest altcoin, it’s been an even worse year, with ETH dipping by 31 percent YTD.

The report further found that when denominated in ETH, NFT prices have an inverse correlation with crypto spot prices. Nansen found that its NFT 500 index had a -0.46 correlation coefficient with Bitcoin and a -0.6 correlation with Ether. A coefficient of -1 indicates the maximum opposite movement of two phenomena, while +1 indicates maximum correlation.

The report found that all this only applies when NFTs are denominated in ETH and not the USD. Nansen claims that this is primarily due to volatility.

Speaking to one outlet, Louisa Choe, a research analyst at the firm explained:

When NFTs are priced in USD their performance also varies widely. This is due to the volatility in the ETH/USD exchange rate. As such, the resulting correlation coefficients also differ. This may be an important factor for investors when deciding on whether the denomination of their portfolio should be in cryptocurrencies or fiat currencies