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The behavior and determinants of illiquidity in the non-fungible tokens (NFTs) market

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  • Wilkoff, Sean
  • Yildiz, Serhat

Abstract

We provide the first study of time-varying and cross-sectional properties of liquidity in the nascent and rapidly growing non-fungible token (NFT) marketplace. Using transaction-level data, we document important weekday patterns in NFT liquidity. Despite the decentralized nature and infancy of the marketplace, we show the overall determinants of NFT liquidity have several parallels with highly developed financial markets. We then study how the arrival of new information impacts NFT marketplace liquidity. By reducing information frictions, NFT news increases NFT liquidity, especially when the media source tends to provide more specific or technical information about NFTs. Overall, our findings deepen our understanding of how liquidity impacts newly developed marketplaces.

Suggested Citation

  • Wilkoff, Sean & Yildiz, Serhat, 2023. "The behavior and determinants of illiquidity in the non-fungible tokens (NFTs) market," Global Finance Journal, Elsevier, vol. 55(C).
    • Handle: RePEc:eee:glofin:v:55:y:2023:i:c:s1044028322000849
    DOI: 10.1016/j.gfj.2022.100782
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    Cited by:

    1. Oh, Sebeom, 2023. "Market Manipulation in NFT Markets," MPRA Paper 116704, University Library of Munich, Germany.
    2. Proelss, Juliane & Sévigny, Stéphane & Schweizer, Denis, 2023. "GameFi: The perfect symbiosis of blockchain, tokens, DeFi, and NFTs?," International Review of Financial Analysis, Elsevier, vol. 90(C).
    3. Jan Schwiderowski & Asger Balle Pedersen & Jonas Kasper Jensen & Roman Beck, 2023. "Value creation and capture in decentralized finance markets: Non-fungible tokens as a class of digital assets," Electronic Markets, Springer;IIM University of St. Gallen, vol. 33(1), pages 1-16, December.

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    More about this item

    Keywords

    Information; News; Non-fungible tokens; Digital assets; Liquidity; Blockchain; Ethereum;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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