People are selling themselves their own NFTs to drive up prices, report finds
nbcnews.com
nbcnews.com
[1] - https://www.youtube.com/watch?v=d_o3nZHzCwA [video][4 mins]
[2] - https://www.youtube.com/watch?v=ZpqreZlmHGU [video][7 mins]
Reminds me of all the market exchange arbitrage in crypto from years back.
But honestly what segment of intangible goods doesn’t do this? Art? Real estate? Let’s be honest…
Maybe the process is more transparent, but the mechanism is the same
Wash trading creates fake sales data at successively higher prices to create the illusion of demand and liquidity.
Share buybacks are a corporation buying back shares (on a regulated public market) and ‘retiring’ them to reduce the amount of shares outstanding, which makes each share worth a little bit more.
How are these even remotely similar?
In both cases the original owners are buying their own assets in a public market and driving the price up
You explained how they are also very different in the way they are done and regulated, but they are definitely more then “remotely similar”
In the case of public companies, retiring really doesn’t mean anything. Just like they can retire the shares, they can issue and sell more. Of course as you pointed out it happens in a relatively transparent way and it’s regulated
No. In a share buyback, the company is buying assets from other people. In wash trading, the current owner is “selling” the assets to themselves. (Or they’re working with someone else to do a loop)
And the retirement of these assets is different than the plan to sell them to another buyer.
It’s akin to the loop you describe, they sell the stock to someone else, then they buy it back
I’m aware the timing, the disclosures, the regulations, etc are different
The mechanism is still the same, they buy their own thing to make the price go up
Just like if I buy a share of AAPL in 2007, sell it in 2011, buy another one in 2015, and sell that one in 2023. I did absolutely no wash trading. I just entered and exited a position a couple of times.
Buy backs are a one-way event. They’re not a loop for the purposes of artificially increasing market cap. If the company decides to offer new shares for sale in five years, that doesn’t mean some sort of loop is formed. That’s a separate event.
Wash trading aims to increase (apparent) market cap by creating trades through insincere activities.
I’m not saying they are “the same thing”
I’m saying the basic mechanism and potentially motivation is the same:
They buy their own thing and make the price go up
No. In one case, someone is selling an NFT to themself. In the other case, a shareholder is selling an equity share to a corporation on a public market. Note that in the second case, the buyer and seller are different parties, which they are not in the NFT case, the NFT case is someone selling an asset they hold to themself.
That said, stock buyback is very different. They are buying back their stock from people that bought it previously. The whole point is to reduce circulation of stock, and for that you have to reduce volume out there, which means not introducing new stock that you buy at a higher price. (Which, could be done, but is unlikely to make much sense.)
A lot of this is from misunderstandings on how stock makes money for companies. Many assume that "Meta price up means they have more money," but as they have not released new stock in a while, prices of existing shares going up doesn't really do much for them as a company.
When a company does a stock buyback it’s abundantly clear that the company is buying its own stock.
The point of wash trading is to make it seem like there’s more activity around a traded security than there really is. You’re artificially pumping the books and it’s extremely illegal with regular stocks