Definition ∞ Price distortion refers to an artificial deviation of an asset’s market price from its true underlying value, often caused by manipulative practices or market inefficiencies. This can result from wash trading, pump-and-dump schemes, or significant information asymmetry. Such distortions mislead market participants and undermine fair valuation. They misrepresent actual supply and demand.
Context ∞ Price distortion is a persistent concern in nascent or less liquid digital asset markets, where manipulative tactics can have outsized effects. Discussions frequently address the need for enhanced market surveillance, regulatory oversight, and improved data transparency to combat such practices. Future market improvements aim to foster more robust and efficient price discovery mechanisms.
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