The Role of the Media in Speculative Markets: Evidence from Non-Fungible Tokens (NFTs)

Abstract

Extant literature debates the role of news media in speculative markets. Some show media hype leads to irrational behavior, while others argue news attenuates market imperfections. To disentangle these roles, we study news about non-fungible tokens (NFTs), which are a natural laboratory since the space is typified by extreme growth coupled with skewed returns. We examine properties of NFT news using a sample of 26,000 articles and 7.6 million trades. We link the intensity and tone of NFT news to subsequent increases in market activity. Yet, seller returns and return volatility decrease following news. Thus, the media plays an information gatekeeper role by increasing informed participation in unregulated tokenized assets. These findings are inconsistent with the media hyping speculative markets. Instead, journalists appear to educate readers on the risks of NFTs.

Keywords: News, Non-Fungible Tokens, Digital Assets, Cryptocurrency, Blockchain, Ethereum

JEL Classification: G12, G14, G41