Preprint on ResearchGate.
ISSN/ISBN: Not available at this time. DOI: 10.13140/RG.2.2.17058.91843
Abstract: We study anomalous price patterns and suspicious automated trading in a substantial portion of nonfungible token (NFT) market activities. Our findings stem from two sets of investigations. In phase one, we employ a three-pronged approach, including Benford's Law, Student's t-test for clustering, and fitting Pareto- Levy law, to identify different facets of wash trading. We observe general nonconformity to Benford's Law in a manner possibly indicative of price manipulation. Subsequently, we select a subsample of 50 prominent NFTs and re-apply Benford's Law on their trade volumes using two yearly aggregated datasets. Although no universally discernible pattern emerges in this phase, the first digit of the transaction data for certain NFTs show adherence to Benford's Law, while the second digit conforms in 15 out of 16 cases. The results were re- scrutinized for robustness via ????2 test and the Mean Absolute Deviation statistic. The upshot is that our findings align with contemporary research on price manipulation dynamics in both cryptocurrency markets and certain traditional financial asset classes. Hence, greater regulation to inspire investor confidence and prevent market abuse in NFTs may be warranted.
Bibtex:
@misc{,
author = {Imtiaz Sifat and Denise van Donselaar and Syed Ahzam Tariq},
title = {Suspicious Trading in Nonfungible Tokens (NFTs)},
year = {2023},
doi = {10.13140/RG.2.2.17058.91843},
}
Reference Type: Preprint
Subject Area(s): Accounting