Understanding the Nansen NFT Index: A New Approach to Investing in NFTs
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Understanding the Nansen NFT Index: A New Approach to Investing in NFTs
The Nansen NFT Index is a trusted barometer for the NFT market. This update raises the standard for high-quality financial infrastructure to better support users in the growing NFT industry.
Navigating Web3 tides with focused insightsBy Nansen
The Nansen NFT Index is a trusted barometer for the NFT market. This update raises the standard for high-quality financial infrastructure to support the growing needs of users in the NFT industry.
Based on widely popular blue-chip collections, Nansen's expanded index offers all clients a foundational understanding of the rapidly emerging NFT market.
Nansen tracks market activity on the Ethereum blockchain using six NFT indices.
According to use cases, Nansen Indices define the types and subtypes of NFTs.
Through these indices, all Nansen users can explore and diversify their participation across different areas of the NFT market.
NFTs represent a fast-growing asset class, making it challenging to track innovation within the market.
While a framework for categorizing NFT use cases is important, no standardized definitions currently exist. To address this gap, Nansen has designed six indices that track NFT market activity on the Ethereum blockchain using ERC-721 and ERC-1155 standards.
These indices include:
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Nansen NFT-500,
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Nansen Blue Chip-10,
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Nansen Social-100,
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Nansen Gaming-50,
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Nansen Art-20,
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Nansen Metaverse-20.
Each index is designed to track major categories of NFT activity based on distinct use cases or applications. Over 500 NFT samples were analyzed and reviewed in developing these metrics.
New Investment Signals
The Nansen NFT indices allow investors to identify how one market segment performs relative to others and the overall market. Performance over the past 30 days reveals three key trends: Social and Metaverse NFTs remain relatively stable.
Daily market capitalization of the Social NFT sector
Daily market capitalization of the Metaverse NFT sector
One possible reason for this stability is that Social NFTs face stronger competition within the NFT market, reducing price information asymmetry. To date, Social NFTs account for 50% of daily NFT market volume. Market participants have more information available to assess Social NFT pricing. Due to their community-driven nature, network effects are particularly strong. Compared to other NFT sectors, Social NFTs have existed longer—dating back to projects like CryptoPunks in 2017—making this sector relatively more mature.
Similarly, while integrating NFTs into the Metaverse is novel, the concept of the Metaverse itself is not new (e.g., Second Life introduced it in 2003). Familiarity with the Metaverse concept and recognition from major companies—such as Facebook rebranding to Meta and Grayscale launching its Decentraland (MANA) Trust—may contribute to the relative stability of Metaverse NFTs. The Social-100 index shows that, as of February 21, 2022, Social NFT products led the NFT market with a 30-day return of 24%. In contrast, the Metaverse-20 index recorded a 30-day return of -3.9%.
Gaming NFTs underperformed compared to other NFT types over the past 30 days
The Gaming-50 index indicates that Gaming NFTs have consistently underperformed since the beginning of 2022. As of February 21, 2022, the 30-day return stood at -9.1%. There is often a significant time lag between the release of test versions of Gaming NFTs and full game launches, making user engagement difficult to sustain. Broader cryptocurrency markets reflect this trend: Axie Infinity declined by -8.49%, while Illuvium and Enjin dropped by 8.0% and 10.5% respectively over the same period. In comparison, the Gaming-50 index aligns closely with the performance of three large-cap gaming cryptocurrencies.
Art NFTs exhibit higher volatility
The Art-20 index highlights the volatility of Art NFTs. Due to typically limited supply and slower trading activity, investors may find it challenging to obtain sufficient information when investing in Art NFTs. When trading stocks, bonds, commodities, or currencies, abundant data helps guide decisions. While some information exists about art collectibles, the level of detail available is far more limited than for publicly traded assets. We therefore assume that asymmetric price information drives speculative behavior among market participants, leading to greater price fluctuations in Art NFTs.
What Are the Six NFT Indices?
Nansen NFT-500
The NFT marketplace is volatile, with no existing benchmark for tracking broad NFT market activity. To address this, Nansen developed the NFT-500 as a benchmark index. Comprising 500 NFT collections weighted by market capitalization, the NFT-500 reflects an average daily trading volume of 85.4% since January 1, 2022.
Nansen Blue Chip-10
Building on the initial success of the Nansen Blue Chip index, the Blue Chip-10 now tracks ten prominent NFT collections. These collections are considered mature, and the index measures them by market capitalization.
Nansen Social-100
We observe that part of the motivation for users owning Profile Picture NFTs is to connect and interact with others within a community. The social function of NFTs extends beyond PFPs. We identify similar social drivers in other subcategories of Social NFTs, such as "Access & Membership" NFTs and "Utility" NFTs used within DAOs.
The chart for the Social-100 index illustrates the different types of Social NFTs, with Profile Picture NFTs dominating the sector’s market capitalization.
Nansen Gaming-50
The Gaming-50 NFT index includes the top 50 Gaming NFTs by market capitalization. It encompasses collections from Play-to-Earn games, GameFi platforms, and role-playing games.
In traditional gaming, developers maintain full control over downloadable content—including ownership verification, server hosting, and in-game item usage. However, Gaming NFTs introduce a new dimension: value earned within gameplay can be realized outside the game via blockchain. For example, in "Wizard & Dragons," players can use NFTs to earn in-game currency.
According to the Gaming-50 index, popular Gaming NFT projects include Vox Series, ASMAIFAAllStarsBoxSet, and CyberKongz.
Nansen Art-20
Art NFTs take various forms. For instance, XCOPY's "TRAITORS" series represents digital art—or what some call new media art—where artists use computers or electronic devices in creation. Another form is generative art, a derivative of digital art that involves programming during the creative process. The Autoglyphs collection exemplifies this. Then there is physical art linked to NFTs, such as works by FEWOCiOUS. Music can also fall under the umbrella of NFT art.
The Art-20 index showcases the diversity of Art NFTs in the market, covering digital art, generative art, physical art, and music. Year-to-date performance highlights the dominance of Generative Art NFTs within the Art NFT space.
Nansen Metaverse-20
The Metaverse-20 NFT index tracks Metaverse-related NFTs such as "Avatars," "Assets," "Land & Real Estate," and "Utilities," comprising the top 20 Metaverse NFT collections weighted by market cap. The metaverse refers to an immersive network of virtual worlds integrating games, entertainment, commerce, and communities, enabling user interaction. Millions spend hours daily navigating virtual social spaces, where NFTs fit seamlessly. Moreover, Metaverse NFTs authenticate ownership and assets within these virtual environments, fueling the growth of the Metaverse economy.
The Metaverse-20 index shows that NFTs related to land and real estate receive particular attention within the sector.
NFT Investing Based on Index Methodology
In traditional finance, ample research shows that index investing can outperform actively managed funds over time. Additionally, market indices provide historical data that help investors make informed decisions. The Nansen NFT Indices offer a reliable compass for the NFT market. This update sets a higher benchmark for quality financial infrastructure, supporting deeper development in the NFT industry. The depth and breadth of index classification deliver comprehensive new market signals to all Nansen users.
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