People have been doing this since NFTs first launched. Its trivial to have an inside circle "selling up" NFTs until some sucker comes along and grabs the bag.
This is very similar to an ancient confidence trick, whereby someone is selling something (e.g. an investment scheme or whatever) and people who are colluding with him pretend to be interested strangers eagerly buying into the scheme.
Wash trading was also described by Ben McKenzie on Bill Maher's show. [1] Another good interview on CNN [2] I am curious if these voices were squelched or people just wanted to believe in NFT's so badly they did not ask for investment advice from people knowledgeable in economics.
You are on solid grounding to say that this isn't exactly new. Not uncommon to have wash sales of real estate or general art pieces. Probably more common to have books and such "bought" to increase the sales ranking driven up.
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.
Share buybacks are not even close to the same thing as wash trading. Please don’t make assertions that are obviously untrue.
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.
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
> In both cases the original owners are buying their own assets
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.
The timing changes everything. In a wash sale I immediately churn the asset with successively higher “selling” prices. In a buyback, the sale was many years ago, to someone else in the market. That’s makes all the difference.
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.
> In both cases the original owners are buying their own assets in a public market and driving the price 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.
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
