Stylized facts of metaverse non-fungible tokens

Abstract

Non-Fungible Tokens (NFTs) within the metaverse represent a rapidly emerging sector in the digital asset space. This paper provides a comprehensive review of the metaverse’s history and an analysis of the stylized facts of five metaverse NFTs: Axie Infinity, Decentraland, Enjin Coin, Theta Network, and The Sandbox. We examine market efficiency, volatility clustering, leverage effects, and the return-volume relationship. Our key findings show that all NFT returns exhibit kurtosis values significantly exceeding the standard value of three, indicating more peaked and heavier-tailed distributions than a normal distribution. Autocorrelation analysis reveals statistically insignificant results, suggesting minimal influence of past returns on current returns. The Hurst exponent fluctuates between 0.3 and 0.8, indicating relative inefficiency in log returns with varying degrees of trend reinforcement and anti-persistence. The GARCH(1,1) model confirms the presence of volatility clustering, with high persistence of volatility shocks over time, and most NFT returns exhibit a negative leverage effect, where negative returns decrease volatility. These findings provide critical insights for investors, content creators, and policymakers, emphasizing the need for innovative strategies and regulatory considerations in this evolving ecosystem. A comparative analysis using alternative metaverse-related assets from Bloomberg and Yield Guild Games enhances the robustness of our findings, enriching the academic discourse on digital assets and laying the groundwork for future research in metaverse NFTs.