Non-fungible token and Cryptocurrency: Substitutes or Complements?

Abstract

On the 14th of March 2022, a vote was held by the European Commission, deciding on the future of half of the crypto market in Europe. This paper aims to investigate the relationship between non-fungible token and cryptocurrency. We want to know, weather non-fungible token and cryptocurrency are substitutes or complements. A review of the literature reveals, that this is not the first time that researchers attempt to analyse the relationship between NFTs and cryptocurrency however, this paper introduces a difference in difference methodology, which has never been used in this field before. Difference in difference is a statistical method used to establish solid cause and effect relationships. We can therefore say with confidence, that the results of this study depict a causal effect. The policy shock from the European Commission will show us, how the markets and in particular investors react to a changing sentiment in the crypto community. In previous studies, researchers believe to have found evidence of a complementary type of relationship between NFTs and cryptocurrency. The findings of this paper confirm these results and clearly show an increase in the number of buyers and an increase in sales volume, of selected non-fungible tokens after the shock.