NFT marketplace design and market intelligence

Nonfungible tokens (NFTs) have exploded in popularity in 2021, generating billions of dollars in transaction volume. In tandem, market intelligence platforms have emerged to track summary statistics about pricing and sales activity across different NFT collections. We demonstrate that marketplace design can significantly influence market intelligence, focusing specifically on the costs of bidding which can differ across marketplaces depending on transaction fees, the prevalence of bidding bots, or the user interface for placing bids. We use data from the CryptoPunks marketplace and build an empirical model of the strategic interaction between sellers and bidders. Counterfactual simulations show that a reduction in bidding costs does not change the quantity of sales, but increases the share of sales that result from bids. Listing prices increase as sellers expect to accept more bids, making assets appear more valuable. The listing and realized sale price ratios between rare and common assets shrink, making the market appear more homogeneous. Collections that are offered by two different marketplaces can exhibit significantly different market statistics because of differences in bidding costs rather than differences in inherent value. The results have implications for the interpretation of NFT market intelligence.