Cryptocurrencies and non-fungible tokens (NFTs) are deeply interconnected. In its nascent stages, the NFT market was essentially a subordinate to the broader cryptocurrency domain. Its small scale meant it was heavily influenced by movements and trends in the cryptocurrency market.

The NFT landscape has undergone substantial evolution over time. The once fledgling market occupied a small niche but grew substantially, exploding into the mainstream consciousness in 2021. Catalyzed by celebrity endorsements, NFTs quickly grew out of their original niche.

Collections such as Bored Ape Yacht Club infiltrated popular culture and emerged as coveted symbols of status and prestige. With the passage of time, the relationship between NFTs and crypto has become more nuanced. That nuance supports the claim made by NFT industry advocates that NFTs are their own distinct, self-sustaining market entity.

Those advocates say that the complex relationship between digital assets like NFTs and conventional cryptocurrencies highlights the need for a comprehensive understanding and analysis of each sector’s distinctive characteristics and use cases.

“While cryptocurrencies are closely related to other financial instruments, such as stocks and bonds, it is believed that, at least currently, NFTs have an art and community aspect that distinguishes them,” said Daisaku Harada, chief of NFT marketplace Unikura.

NFTs have recently shown a noticeable decoupling from the broader cryptocurrency landscape. Downward movement in NFT prices this year occurred at a later date than the downturn in the cryptocurrency market. This is a phenomenon known as the “lag effect,” which refers to a delayed reflection of cryptocurrency movement in the NFT market.