Insider Trading in Cryptocurrency Markets
38 Pages Posted: 12 Aug 2022 Last revised: 12 Aug 2023
Date Written: August 8, 2022
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 25-51% of cryptocurrency listings, yielding at least $9.5 million in trading profits. Unlike insider trading in stocks, scrutiny by authorities does not reduce the level, 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
Suggested Citation: Suggested Citation