Insider trading in cryptocurrency markets

42 Pages Posted: 12 Aug 2022 Last revised: 11 Jun 2024

See all articles by Ester Félez-Viñas

Ester Félez-Viñas

University of Technology Sydney; Digital Finance CRC

Luke Johnson

University of Technology Sydney (UTS); Digital Finance CRC

Tālis J. Putniņš

University of Technology Sydney (UTS); Digital Finance CRC; Stockholm School of Economics, Riga

Date Written: August 8, 2022

Abstract

We find evidence of systematic insider trading in cryptocurrency markets, where individuals use private information to buy coins prior to exchange listing announcements. Leveraging blockchain data, we identify the specific transactions and wallets (individuals) that consistently trade before announcements, ruling out alternative explanations. We estimate that insider trading occurs in 27-48% of cryptocurrency listings, yielding at least $30.3 million in trading profits. Unlike insider trading in stocks, scrutiny by authorities does not reduce the level of insider trading, but pushes it underground via cryptocurrency concealment methods. These findings highlight the substantial challenges in policing cryptocurrency markets.

Keywords: Cryptocurrency, decentralized exchange, insider trading, listing announcement, concealment strategies JEL classification: G14, G18 Cryptocurrency, insider trading, listing announcement, concealment strategies, decentralized exchange JEL classification: G14, G18

JEL Classification: G14, G18

Suggested Citation

Félez-Viñas, Ester and Johnson, Luke and Putnins, Talis J., Insider trading in cryptocurrency markets (August 8, 2022). Available at SSRN: https://ssrn.com/abstract=4184367 or http://dx.doi.org/10.2139/ssrn.4184367

Ester Félez-Viñas (Contact Author)

University of Technology Sydney ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Digital Finance CRC ( email )

Luke Johnson

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Digital Finance CRC ( email )

Talis J. Putnins

University of Technology Sydney (UTS) ( email )

PO Box 123
Broadway
Sydney
Australia
+61 2 9514 3088 (Phone)

Digital Finance CRC ( email )

Stockholm School of Economics, Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia
+371 67015841 (Phone)

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