Will the NFT boom push up the price of Bitcoin?

As the NFT market continues to be hot, NFT has even appeared on the front page headlines of mainstream publications such as The New York Times and cable news programs. But will this craze have a big impact on Bitcoin? Probably not, at least for now.

Bitcoin is currently the cryptocurrency with the longest history and the highest market value, and its price has experienced a week-long increase. As the core of the digital asset market, Bitcoin accounts for up to 62% of this $1.7 trillion market.

Therefore, some people think that Bitcoin may be affected by NFT (mainly based on the Ethereum blockchain), although the connection between the two may be indirect, which is reasonable.

Miha Grčar, head of business development at the cryptocurrency exchange Kraken, said: “Although the use cases of NFTs are different from Bitcoin, they are all aimed at achieving the vision of a decentralized digital future. The two complement each other. of.”

According to data from the nonfungible.com website, as of the end of 2020, the market value of the NFT industry is 338 million U.S. dollars.

However, NFT ushered in amazing growth this year. A few recent examples include the artist Mike Winkelmann (Beeple) whose work was sold at a high price of $69 million on Thursday; a section of Donald lying face down on the ground covered with graffiti. Trump (Donald Trump) animation clips sold for a high price of 6.6 million US dollars; a group of 34 “digital collectibles” called CryptoPunks sold for 1 million US dollars.

In contrast, the market value of Bitcoin is approximately $1 trillion. Therefore, at least for now, the NFT industry may not be enough to have a great influence in the cryptocurrency field. What’s more, MicroStrategys and Tesla (Teslas) have also purchased billions of dollars in bitcoin to hedge against inflation. And bet on the future payment technology.

Piers Kicks, a risk partner at the cryptocurrency analysis company Delphi Digital, told CoinDesk on Twitter that, judging from the market size of the two, the NFT boom is actually unlikely to have a substantial impact on the price of Bitcoin.

Even so, the NFT market is still considered to have broad development potential, involving artworks, electronic game props (such as skins, weapons and avatars, etc.), music, digital trading cards, tokenized real estate, horse racing, fashion sports shoes, Virtual land and highlights of sports games, etc.

Such a wide range of application scenarios can attract more people to enter the cryptocurrency ecosystem. Therefore, more funds may flow to the Bitcoin market.

Joel Kruger, a cryptocurrency strategist at LMAX Digital, told CoinDesk: “If you want to buy NFT, you need to buy cryptocurrency. If you start paying attention to cryptocurrency, you will understand the value proposition of Bitcoin. .”

Ke** said: “NFT has opened the door to a new world for people, allowing people to have access to new technologies such as blockchain and cryptocurrency. This is the best way to implement new technology adoption. People attract the past.”

It should be noted that the vast majority of NFT transactions use Ether. Ether is the native token of the Ethereum blockchain and the second largest token by market value.

For example, Beeple’s NFT was bought by Metakovan with Ether worth $69 million. Metakovan is the anonymous founder of the NFT fund Metapurse.

There is a strong correlation between Bitcoin and Ethereum, because the price of Bitcoin usually has a great influence on the price of cryptocurrencies such as Ethereum.

According to CoinDesk’s data, despite a decline compared to the beginning of last year, as of March 11, the correlation between Bitcoin and Ethereum remained at 0.7.

Bitcoin can also be converted into tokenized forms such as wBTC and transferred on the Ethereum blockchain.

In addition, there are signs that people’s interest in NFTs will have some impact on the Ethereum market.

According to nonfungible.com’s “2020 NFT Report”, when the NFT transaction volume increased sharply in the fourth quarter of 2020, the price of Ether also rose rapidly from the September low of $312 to $1,000. This year, the price of Ether rose further and reached a record high of $2,000 last month.