NFTs Emergence in Financial Markets and their Correlation with DeFis and Cryptocurrencies

Non-fungible tokens (NFT) have been defined as digital assets that encode items such art, collectables, and in-game goods. They are often stored in smart contracts on a blockchain exchanged online, frequently using Bitcoin. As NFT became increasingly popular the last few years, decentralized financial (DeFi) also started receiving growing attention instruments differ from NFTs cryptocurrencies. Based data NFTs, DeFi tokens, cryptocurrency daily prices between January 15th December 6th, 2021, we examine correlation major cryptocurrencies Bitcoin Ethereum. Using volatility spillover matrix approach by Diebold Yilmaz (2012) applied Dowling (2021) including DeFis into discussion, find there is very limited to non-traditional markets. Also, appear be relatively unconnected Following methodology Karim, Lucey, Naeem Uddin of quantile connectedness cross-quantilogram model Han, Linton, Oka Whang (2016), determine positive Crypto spillovers exceeded negative spillovers. This paper concludes both show significant potential terms portfolio diversification since they display low with cryptocurrencies, especially case thanks it being disconnected other market, based this year's data. has implications for investors who seek diversify their portfolios cryptocurrency, assets.