How to value NFTs: Understanding the influential factors

How to value NFTs: Understanding the influential factors

Rarity, popularity, usefulness and appeal play a pivotal role in assessing the value of non-fungible tokens (NFTs). In this excerpt of Sygnum’s research investment report, we uncover the nuances of NFT valuation.

Non-fungible tokens are unique representations of single assets such as a concert ticket or a piece of digital art. They are in themselves not economically productive.

NFTs that represent economic value such as a flight ticket or discount voucher simply inherit that value. NFTs in the art and collectibles class, however, have no intrinsic value.

The value of these tokens is in the eye of the beholder – if there is one other party to whom that piece of art, collectible, avatar, etc. is meaningful, they will determine the value. This is analogous to the value of traditional art and collectibles.

What an investor can assess is the likely value that someone else will place on the NFT. This will depend on the rarity (the number of identical items created and the number of different items from the same artist or studio), the popularity (based on past demand and demand for similar items), the usefulness (e.g. items usable in games or in metaverse application) and an assessment of the likely desirability.

The price of NFTs with comparable features can give a guide to the likely value a potential buyer will place on the NFT.

FACTORS INFLUENCING THE PERCEIVED VALUE OF NFTS

Factors influencing the perceived value of NFTs
Thomas Frei

Disclaimer

This document is purely for educational purposes and has been issued by Sygnum Bank AG. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication. It does not constitute an offer or a recommendation to subscribe, purchase, sell or hold any security or financial instrument. It contains the opinions of Sygnum Bank AG, as at the date of issue. These opinions and the information contained herein do not take into account an individual‘s specific circumstances, objectives, or needs. No representation is made that any investment or strategy is suitable or appropriate to individual circumstances or that any investment or strategy constitutes personalised investment advice to any investor. Therefore, you must verify the above and all other information provided in the document or otherwise review it with your external advisors. Some investment products and services, including custody, may be subject to legal restrictions or may not be available worldwide on an unrestricted basis. The information and analysis contained herein are based on sources considered as reliable. Sygnum Bank AG uses its best efforts to ensure the timeliness, accuracy, and comprehensiveness of the information contained in this document. Nevertheless, all information indicated herein may change without notice.

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