Abstract

Theoretically, blockchain’s transparency is expected to reduce information asymmetry and, in turn, curb speculative trading. Yet speculation remains pervasive in blockchain-enabled markets such as NFTs—an observation we confirm with a model-free analysis of transactions on the CryptoKitties platform. We argue that this apparent puzzle arises because the level of public information varies substantially across NFTs, and public information can influence speculation through two competing mechanisms. While richer public information improves price discovery, reducing mispricing and limiting opportunities for speculative arbitrage, high-visibility information can also serve as a liquidity signal, attracting attention and encouraging speculative trading. Empirically, we find evidence that the price-discovery mechanism dominates: higher levels of public information are associated with significantly fewer speculative transactions. This effect is stronger for users with higher baseline propensity to speculate and varies with NFT rarity. Finally, at the creator level, observable successful speculation dampens creators’ incentives to continue producing content, suggesting longer-run implications for platform sustainability. At a broader level, this study highlights a fundamental problem: the use of IT alone, such as blockchain, may not be adequate to resolve market inefficiencies, as evidenced by the prevalence of NFT speculations.

DOI

10.17705/1jais.00999

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