Insider trading has a toxic impact on crypto industry keeping general public from investments.
Enrichment via limited-access information in crypto space.
The crypto industry faces certain difficulties caused by insider trading. Although there are no official laws or regulatory acts that would directly forbid insider trading, the industry observers suppose this impact is much greater than we think.
Not many crypto exchanges and companies are listed at traditional platforms, and therefore “insider trading” does not take place in the usual sense.
Still it is represented in crypto in certain forms. This may be a group of people consisting of developers, team members that have more skills than others and use them for buying and selling tokens before some news gets to the market.
Besides, these can be exchanges buying coins before announcing that. Such forms of trading impact negatively on cryptocurrencies undermining the credibility of exchanges, startups and keeping people from investing into crypto. That is why the market may need some regulation to considers these firms illegal.
It is obvious that some people will always have access to information not available for the rest”, said Favad Razakzada, ThinkMarkets analyst, “for instance, when a certain crypto is going to be listed on some exchange, people working for this exchange are usually the first to know. But whether to use this information or not, it all depends on the person”.
Speaking at Cryptonews.com, Razakzada added, “I truly believe that this activity continues but I can’t prove that”. And he’s not alone in his suspicions. Traders repeatedly accused Coinbase in insider trading remembering Bitcoin Cash (BCH) listing in 2018 and this May when omisego (OMG) Coinbase listing caused sharp growth in the token’s price.
Same accusations were made against other large exchanges like Binance (which indicated XRP in January before its pump) and BitMEX (accused by Nuriel Rubini of insider trading). Coinbase, Binance, BitMex and other exchanges reject all the allegations.
Regulation and maturation of the crypto ecosystem.
Considering the industry’s nature, I do not think it’s a simple task to prosecute insider crypto trading with legal tools”, said Razakzada.
Elimination of insider trading may be challenging but Phillip Sandner, the head of Frankfurt school blockchain centre expects its volume will be decreasing since the market is more reliant on basic crypto assets than on freshly released coins. Besides, regulators can also take measures that would be easier as the market gets mature.
Regulation is definitely necessary, and this is the right answer”, said Sandner, “Nevertheless, it is still unclear whether stronger regulation would be able to prevent price manipulations. I expect that it would reduce due to the market development”
Sandner notes that strictly regulated markets like Börse Stuttgart, which is now offering crypto, are making insider trading almost impossible.
It may take some time before cryptos are fully supervised, and therefore any manipulations would be eliminated.
Considering that insider trading still exists on traditional markets, we should not expect that full control and maturity will completely destroy it. It may survive as a given, so it’s better to insure against risks instead of waiting for an “ideal market”