Market Phases and Price Discovery in NFTs: A Deep Learning Approach to Digital Asset Valuation
Abstract
:1. Introduction
2. Literature Review
2.1. Blockchain and Digital Asset Valuation
2.2. NFT-Specific Market Analysis
3. Methodology
3.1. Data
3.2. CARD Model
3.2.1. Problem Formulation
3.2.2. Hierarchical Patch Embedding
3.2.3. Multi-Head Channel-Wise Attention
3.2.4. Relative Distance Enhanced Temporal Attention
3.2.5. Feature Fusion and Output Layer
3.3. Training Strategy
3.4. Experiment Design
4. Results
4.1. Comparative Model Summary
4.2. Model Performance Comparison
4.3. Cross-Model Analysis
4.4. Cross-Model Horizon Analysis
- Short-Term Dynamics (96 H)All models exhibit their strongest performance in this range, yet critical differences emerge. While RNN and LSTM show comparable MSE values (0.183 vs. 0.217), their MAE divergence (0.217 vs. 0.183) suggests recurrent architectures struggle with outlier events common in NFT markets. LightGBM’s relatively high MSE (0.253) despite moderate MAE (0.167) indicates sensitivity to extreme price fluctuations, a weakness exacerbated in longer horizons.
- Mid-Term Forecasting (192–336 H)The 336-h (14-day) window emerges as a critical stress test. CARD’s MAE (0.152) remains 35.0% lower than LSTM (0.234) and 37.4% below LightGBM (0.243), highlighting its capacity to capture NFT market cycles. Transformer architectures show gradual degradation, with MAE increasing 29.6% from 96h (0.162) to 336h (0.211), compared to CARD’s 18.8% rise. Prophet’s performance collapse at this horizon (0.202 MAE vs. CARD’s 0.152) correlates with its inability to model sudden shifts in royalty-driven valuation patterns.
- Long-Term Predictions (720 H)At the maximum tested horizon, architectural limitations become stark. LSTM’s MAE (0.259) exceeds its 96-h performance by 41.5%, while LightGBM shows 44.3% degradation (0.167 → 0.241). CARD maintains superior stability, with 720 h MAE (0.167) remaining 30.5% above its 96h baseline—a critical advantage given NFT markets’ propensity for regime shifts. The Transformer’s 47.5% error growth (0.162 → 0.239 MAE) underscores the inefficiency of generic attention mechanisms for long-horizon NFT forecasting.
- Temporal Myopia in Recurrent ArchitecturesLSTM’s quadratic error growth (41.5% MAE increase from 96h to 720 h) reflects an inability to reconcile NFT markets’ high-frequency volatility with long-term liquidity trends.
- Momentum Bias in Tree-Based ModelsLightGBM’s transient competitiveness at 192 h (0.191 MAE) collapses by 336 h (0.243, 27.2% increase from 192 h), revealing overreliance on medium-term momentum signals that fail during market reversals.
- Structural Rigidity in Decomposition ModelsProphet’s consistent underperformance (31.3% higher average MAE than CARD) stems from oversimplified trend assumptions incompatible with NFT markets’ creator-driven valuation dynamics.
4.5. Market Regime-Specific Feature Dynamics
- Aggregator Stickiness: Aggregator user metrics (AGG UniqueUsers: 0.0546, AGG TotalUsers: 0.0523) show 24–27% higher importance than in bull markets, reflecting traders’ reliance on consolidated platforms during volatility.
- Transaction Compression: TRD AvgTxSize (0.0586) emerges as the most critical feature, with 47.6% higher importance than in bull regimes, signaling a shift toward smaller, frequent trades.
- Liquidity Indicators: Marketplace volumes (MKT VolumeUSD: 0.0563, TotalVolume: 0.0562) and total users (0.0561) collectively account for 15.8% of total feature importance, underscoring liquidity monitoring.
- Royalty Irrelevance: Royalty metrics (ROY BluechipFees: 0.0007) become negligible, indicating diminished focus on premium NFT projects.
- Top Trader Influence: Top trader volumes (TOP VolumeETH: 0.0283, VolumeUSD: 0.0279) inversely correlate with aggregator activity, suggesting traders bypass aggregators to chase momentum.
- Royalty Resurgence: ROY PayingUsers (0.0214) gain 28.9% higher importance than in neutral markets, reflecting renewed interest in creator-driven value.
- Volume Decoupling: Marketplace volumes (MKT VolumeUSD: 0.0410) decline in importance (−27.2% vs bear markets), as traders prioritize speculative opportunities over platform fundamentals.
- Royalty Premiums: ROY BluechipFees (0.1049) dominate with 149× higher importance than in bull markets, acting as stability anchors for valuation.
- Platform Diversification: AGG NonAggUsers (0.0432) rise to peak importance (+21.6% vs bear markets), indicating a shift toward direct marketplace engagement.
- Transaction Selectivity: TRD metrics (AvgTxSize: 0.0332, EthSalesMA: 0.0303) decline in influence, replaced by royalty fees and user behavior.
- Bear Markets: Monitor AGG UniqueUsers and MKT VolumeUSD for liquidity health; prioritize small, frequent trades (TRD AvgTxSize).
- Bull Markets: Track TOP VolumeETH and ROY PayingUsers to gauge momentum; reduce reliance on aggregators.
- Neutral Markets: Use ROY BluechipFees as stability signals; diversify across marketplaces (AGG NonAggUsers).
4.6. Temporal Stability Analysis: Assessing Model Robustness to Concept Drift
4.6.1. Rolling Window Performance Evaluation
4.6.2. Feature Importance Stability
- Within-Phase Stability: Feature importance rankings demonstrate high stability within the same market phase, with average Kendall’s tau values above 0.68 for all phases. This indicates that while the market evolves, the relative importance of features remains largely consistent within similar market conditions.
- Cross-Phase Volatility: When comparing feature rankings across different market phases, stability drops significantly (tau = 0.412), confirming our hypothesis that predictive factors fundamentally change as the market transitions between regimes.
- Phase-Specific Stable Features: Each market phase exhibits certain consistently important features: AGG_UniqueUsers during bear markets, TOP_VolumeETH during bull markets, and ROY_BluechipFees during neutral markets. These represent “anchor metrics” that maintain their predictive value despite other market changes.
- Emerging Indicators: Over time, we observed certain features gaining importance, particularly metrics related to aggregator platform usage (increasing 18.3% in importance over the study period) and royalty dynamics (increasing 21.7%), reflecting the market’s structural evolution toward platform consolidation and creator economics.
4.6.3. Drift Detection and Adaptation
- Dynamic Channel Attention: The channel-wise attention mechanism automatically adjusts feature importance weights based on recent data patterns, effectively performing implicit feature reweighting as market conditions evolve.
- Hierarchical Temporal Processing: The model’s multi-scale approach to time series processing allows it to simultaneously adapt to both rapid shifts in short-term patterns and gradual changes in longer-term trends.
4.6.4. Persistence of Regime-Specific Patterns
4.7. Computational Efficiency and Real-Time Feasibility
4.7.1. Inference Latency Analysis
4.7.2. Memory Usage and Model Size
4.7.3. Scaling Analysis and Deployment Scenarios
- Trading Signal Generation: With sub-15ms inference time for individual predictions, CARD is suitable for generating near-real-time trading signals, potentially supporting algorithmic trading systems that require frequent model updates.
- Portfolio Monitoring: For investment managers tracking multiple NFT collections simultaneously, CARD’s efficient batch processing (43.7 ms for 16 parallel predictions) enables comprehensive portfolio monitoring with minimal computational overhead.
- Market Surveillance: The model’s ability to efficiently process long historical sequences makes it well-suited for market surveillance applications that require detecting anomalous patterns against extended historical contexts.
4.7.4. Optimization Strategies for Real-Time Deployment
5. Discussion
6. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Category | Variable | Description |
---|---|---|
Dependent Variable | FK500 Index | Hourly Forkast 500 NFT index value |
Aggregator | AGG TotalVolume | Daily total transaction volume on aggregator platforms |
AGG UniqueUsers | Total number of unique users on aggregator platforms | |
AGG NonAggUsers | Number of users directly using marketplaces | |
AGG TotalUsers | Total number of aggregator platform users | |
Trading Scale | TRD TotalSales | Total number and scale of transactions |
TRD UniqueBuyers | Number of unique buyers and average transaction scale | |
TRD UniqueSellers | Number of unique sellers and average transaction scale | |
TRD AvgTxSize | Average transaction size | |
TRD SalesCount | Number of transactions | |
TRD AvgTradesPerUser | Average number of trades per user | |
TRD EthSalesMA | Moving average of ETH-based sales | |
Marketplace | MKT TotalFees | Total marketplace fees |
MKT TotalSales | Total marketplace sales | |
MKT TotalVolume | Total marketplace trading volume | |
MKT VolumeUSD | Total marketplace volume in USD | |
MKT TotalUsers | Total number of marketplace users | |
Royalty | ROY BluechipFees | Total royalties from blue chip NFT projects |
ROY TotalFees | Total royalty fees | |
ROY PayingUsers | Number of royalty-paying addresses | |
ROY PayingTx | Number of royalty-paying transactions | |
Top Traders | TOP VolumeUSD | Top traders’ volume in USD |
TOP VolumeETH | Top traders’ volume in ETH | |
TOP TotalTrades | Total number of top traders’ transactions | |
TOP TotalTraders | Number of top traders | |
Market Total | TOT Sales | Total NFT market sales |
TOT Volume | Total NFT market volume | |
TOT VolumeUSD | Total NFT market volume in USD | |
TOT Users | Total NFT market users | |
TOT ActiveTraders | Total number of active traders |
Time Period: January 2022–December 2024, Hourly Data (N = 26,287) | |||||
---|---|---|---|---|---|
Variable | Min | Median | Mean | Max | SD |
Dependent Variable | |||||
FK500 Index | 1098 | 2787 | 6657 | 33,903 | 7123 |
Aggregator Metrics | |||||
AGG Total Volume | 5.0 | 240.0 | 365.2 | 3122.0 | 421.3 |
AGG Unique Users | 2 | 78 | 105 | 842 | 98 |
AGG Non Agg Users | 24.0 | 293.0 | 670.4 | 4789.0 | 842.6 |
AGG Total Users | 29.0 | 394.0 | 775.4 | 4908.0 | 892.1 |
Trading Scale Metrics | |||||
TRD Total Sales | 7.43 | 367.71 | 1102.62 | 133,767.38 | 3124.5 |
TRD Unique Buyers | 18.0 | 411.0 | 815.5 | 4943.0 | 892.3 |
TRD Unique Sellers | 18 | 525 | 1026 | 5793 | 1124 |
TRD Avg Tx Size | 0.0945 | 1.0173 | 4.9758 | 511.5824 | 12.84 |
TRD Sales Count | 19 | 828 | 1509 | 8704 | 1682 |
TRD Avg Trades Per User | 1.056 | 2.046 | 2.386 | 45.670 | 1.524 |
TRD Eth Sales MA | 2.538 | 64.834 | 199.748 | 19,578.668 | 524.6 |
Marketplace Metrics | |||||
MKT Total Fees | 26 | 5113 | 43,761 | 8,183,481 | 182,643 |
MKT Total Sales | 47 | 926 | 1543 | 8616 | 1724 |
MKT Total Volume | 9.4 | 400.8 | 657.6 | 24,057.3 | 842.1 |
MKT Volume USD | 25,509 | 777,731 | 1,475,119 | 57,363,600 | 2,124,562 |
MKT Total Users | 33.0 | 461.0 | 839.8 | 4939.0 | 892.4 |
Royalty Metrics | |||||
ROY Bluechip Fees | 107 | 10,618 | 50,848 | 2,866,242 | 124,682 |
ROY Total Fees | 107 | 10,618 | 50,848 | 2,866,242 | 124,682 |
ROY Paying Users | 14.0 | 304.0 | 797.6 | 5587.0 | 1124.2 |
ROY Paying Tx | 18 | 504 | 1213 | 8554 | 1642 |
Top Trader Metrics | |||||
TOP Volume USD | 22,505 | 715,043 | 1,403,312 | 59,507,103 | 2,242,425 |
TOP Volume ETH | 8.975 | 367.981 | 622.250 | 21,214.876 | 824.6 |
TOP Total Trades | 47 | 920 | 1568 | 8605 | 1842 |
TOP Total Traders | 70 | 962 | 1817 | 10,056 | 2124 |
Market Total Metrics | |||||
TOT Sales | 47 | 926 | 1543 | 8616 | 1724 |
TOT Volume | 9.4 | 400.8 | 657.6 | 24,057.3 | 842.1 |
TOT Volume USD | 25,509 | 777,731 | 1,475,119 | 57,363,600 | 2,124,562 |
TOT Users | 33.0 | 461.0 | 839.8 | 4939.0 | 892.4 |
TOT Active Traders | 70.0 | 917.0 | 1724.9 | 9791.0 | 2042.8 |
Model | Key Characteristics | Limitations |
---|---|---|
RNN [60] | Maintains hidden states for sequences Processes data sequentially Learns temporal dependencies | Vanishing gradient problem Limited long-term memory Sequential processing bottleneck |
LSTM [61] | Memory cells and gates Better long-term dependencies Controlled information flow | Sequential processing limitation Computational bottlenecks Limited parallel processing |
Transformer [62] | Self-attention mechanism Parallel processing Global context modeling | Quadratic complexity Lacks market-specific mechanisms Variable sequence length issues |
LightGBM [63] | Gradient boosting framework Efficient with tabular data Strong non-linear modeling | Limited sequential processing Misses temporal dependencies Struggles with long-term trends |
Prophet [4] | Decomposition-based approach Strong seasonal modeling Handles missing data | Oversimplifies complex patterns Rigid seasonality assumptions Limited with irregular patterns |
Metric | CARD | LSTM | RNN | LightGBM | Prophet | Transformer | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
MSE | MAE | MSE | MAE | MSE | MAE | MSE | MAE | MSE | MAE | MSE | MAE | |
96 | 0.142 | 0.128 | 0.217 | 0.183 | 0.183 | 0.217 | 0.253 | 0.167 | 0.195 | 0.158 | 0.201 | 0.162 |
192 | 0.158 | 0.139 | 0.241 | 0.209 | 0.269 | 0.231 | 0.209 | 0.191 | 0.227 | 0.179 | 0.235 | 0.188 |
336 | 0.173 | 0.152 | 0.284 | 0.234 | 0.235 | 0.258 | 0.295 | 0.243 | 0.243 | 0.202 | 0.261 | 0.211 |
720 | 0.189 | 0.167 | 0.317 | 0.259 | 0.347 | 0.281 | 0.279 | 0.241 | 0.293 | 0.231 | 0.302 | 0.239 |
Avg | 0.166 | 0.147 | 0.265 | 0.221 | 0.258 | 0.247 | 0.259 | 0.210 | 0.239 | 0.193 | 0.250 | 0.200 |
Feature | Bear | Bull | Neutral |
---|---|---|---|
AGG TotalVolume | 0.0403 | 0.0351 | 0.0226 |
AGG UniqueUsers | 0.0546 | 0.0430 | 0.0344 |
AGG NonAggUsers | 0.0523 | 0.0396 | 0.0432 |
AGG TotalUsers | 0.0523 | 0.0406 | 0.0410 |
TRD AvgTradesPerUser | 0.0408 | 0.0273 | 0.0258 |
TRD AvgTxSize | 0.0586 | 0.0397 | 0.0332 |
TRD EthSalesMA | 0.0486 | 0.0388 | 0.0303 |
TRD SalesCount | 0.0291 | 0.0330 | 0.0148 |
TRD TotalSales | 0.0460 | 0.0430 | 0.0275 |
TRD UniqueBuyers | 0.0495 | 0.0402 | 0.0412 |
TRD UniqueSellers | 0.0257 | 0.0308 | 0.0105 |
MKT TotalFees | 0.0055 | 0.0041 | 0.0617 |
MKT TotalSales | 0.0343 | 0.0367 | 0.0168 |
MKT TotalUsers | 0.0561 | 0.0431 | 0.0417 |
MKT TotalVolume | 0.0562 | 0.0405 | 0.0381 |
MKT VolumeUSD | 0.0563 | 0.0410 | 0.0383 |
ROY BluechipFees | 0.0007 | 0.0001 | 0.1049 |
ROY TotalFees | 0.0001 | 0.0001 | 0.1049 |
ROY PayingUsers | 0.0166 | 0.0214 | 0.0001 |
ROY PayingTx | 0.0282 | 0.0316 | 0.0027 |
TOP TotalTraders | 0.0348 | 0.0364 | 0.0220 |
TOP TotalTrades | 0.0348 | 0.0371 | 0.0167 |
TOP VolumeETH | 0.0356 | 0.0283 | 0.0460 |
TOP VolumeUSD | 0.0358 | 0.0279 | 0.0471 |
TOT Sales | 0.0343 | 0.0367 | 0.0168 |
TOT Users | 0.0561 | 0.0431 | 0.0417 |
TOT Volume | 0.0562 | 0.0405 | 0.0381 |
TOT VolumeUSD | 0.0563 | 0.0410 | 0.0383 |
TOT ActiveTraders | 0.0347 | 0.0358 | 0.0220 |
Market Phase | Average Kendall’s Tau | Top-5 Stability% | Most Stable Feature | Most Volatile Feature |
---|---|---|---|---|
Bear Market | 0.743 | 87.3% | AGG_UniqueUsers | ROY_BluechipFees |
Bull Market | 0.681 | 73.2% | TOP_VolumeETH | AGG_NonAggUsers |
Neutral Market | 0.705 | 81.5% | ROY_BluechipFees | TRD_SalesCount |
Cross-Phase | 0.412 | 42.8% | MKT_VolumeUSD | ROY_PayingUsers |
Model | Batch Size 1 | Batch Size 16 | Batch Size 64 | Batch Size 256 |
---|---|---|---|---|
CARD | 12.3 ± 0.8 | 43.7 ± 1.2 | 128.6 ± 2.5 | 415.8 ± 5.3 |
LSTM | 8.5 ± 0.6 | 37.2 ± 1.1 | 112.4 ± 2.1 | 385.3 ± 4.8 |
RNN | 6.2 ± 0.4 | 28.5 ± 0.9 | 87.3 ± 1.8 | 301.7 ± 3.9 |
Transformer | 15.8 ± 1.0 | 52.3 ± 1.4 | 146.9 ± 2.8 | 486.2 ± 6.7 |
LightGBM | 3.1 ± 0.2 | 15.4 ± 0.6 | 41.2 ± 1.2 | 142.5 ± 2.3 |
Prophet | 4.5 ± 0.3 | 46.8 ± 1.3 | 172.5 ± 3.5 | 612.7 ± 8.9 |
Model | Parameter Count | Model Size (MB) | FLOPS per Inference |
---|---|---|---|
CARD | 2.83 M | 11.32 | 284.5 M |
LSTM | 3.42 M | 13.68 | 327.6 M |
RNN | 1.15 M | 4.60 | 112.8 M |
Transformer | 4.26 M | 17.04 | 405.2 M |
LightGBM | 0.58 M | 2.32 | 25.3 M |
Prophet | - | 0.85 | - |
Optimization Technique | Latency Reduction | MAE Impact | Memory Reduction |
---|---|---|---|
Knowledge Distillation | 35.8% | +2.3% | 41.2% |
Quantization (INT8) | 47.2% | +3.5% | 73.6% |
Pruning (30% sparsity) | 22.5% | +1.8% | 28.4% |
Feature Selection (top 20) | 18.3% | +1.2% | 12.5% |
Hybrid CPU-GPU Pipeline | 15.6% | 0.0% | −5.3% |
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Kang, H.-J.; Lee, S.-G. Market Phases and Price Discovery in NFTs: A Deep Learning Approach to Digital Asset Valuation. J. Theor. Appl. Electron. Commer. Res. 2025, 20, 64. https://doi.org/10.3390/jtaer20020064
Kang H-J, Lee S-G. Market Phases and Price Discovery in NFTs: A Deep Learning Approach to Digital Asset Valuation. Journal of Theoretical and Applied Electronic Commerce Research. 2025; 20(2):64. https://doi.org/10.3390/jtaer20020064
Chicago/Turabian StyleKang, Ho-Jun, and Sang-Gun Lee. 2025. "Market Phases and Price Discovery in NFTs: A Deep Learning Approach to Digital Asset Valuation" Journal of Theoretical and Applied Electronic Commerce Research 20, no. 2: 64. https://doi.org/10.3390/jtaer20020064
APA StyleKang, H.-J., & Lee, S.-G. (2025). Market Phases and Price Discovery in NFTs: A Deep Learning Approach to Digital Asset Valuation. Journal of Theoretical and Applied Electronic Commerce Research, 20(2), 64. https://doi.org/10.3390/jtaer20020064