What Is the Concept of “Wash Trading” and How Does It Affect NFT Valuation?
Wash trading is a manipulative practice where an investor simultaneously buys and sells an asset to create misleading, artificial activity and volume. In the NFT market, this is done to inflate the perceived value and sales history of a specific NFT or collection.
This artificially high valuation can then deceive lending protocols or buyers, leading to unfair loan terms or overpayment.
Glossar
Perceived Value
Concept ⎊ Perceived Value refers to the market's subjective assessment of a cryptocurrency or derivative's worth, which can significantly diverge from any calculated intrinsic or fundamental value due to sentiment or momentum.
Lending Protocols
Protocol ⎊ Lending protocols, within the convergence of cryptocurrency, options trading, and financial derivatives, represent codified frameworks enabling decentralized lending and borrowing activities.
Nft Appraisal
Appraisal ⎊ NFT appraisal is the process of estimating the fair market value of a non-fungible token.
Wash Trading in Crypto
Mechanism ⎊ Wash trading in cryptocurrency represents a form of market manipulation involving the simultaneous purchase and sale of an asset to create artificial volume, often without a change in beneficial ownership.
Unfair Loan Terms
Provision ⎊ Unfair loan terms in cryptocurrency and derivatives markets refer to contractual provisions that create a significant imbalance between lender and borrower, often favoring the platform or protocol operator.
Regulatory Stance
Policy ⎊ Regulatory Stance refers to the official position, rules, and guidelines adopted by governmental bodies and financial authorities regarding the legal and operational status of cryptocurrencies, options trading, and financial derivatives.