DEFINITION
Paper hands is a derogatory term for someone who quickly sells an NFT, or sells in a panic when market prices drop. The opposite of diamond hands.
Consequently, to paper hand an NFT means to sell it for a small profit, a wash, or a loss.
CONTEXT
A person is said to have paper hands if they are a short-term NFT holder. The term has a negative connotation, as it implies that the holder does not have long-term faith in the NFT they bought, or faith in its creator. If they did, they would confidently hold on to the asset in the belief that its value will increase over time.
Flippers and speculators would be said to have paper hands, as their goal is to make a profit by reselling NFTs, not keeping them.
In contrast, buyers with diamond hands are those who are committed to holding their NFTs through good markets and bad. Diamond hands plan to either hold onto their NFTs forever, or to sell them for a very high value in the future (as opposed to the small profit or even the loss that paper hands might take by selling in the near-term).