Insider Trading in Cryptocurrency Markets

20 Pages Posted: 12 Aug 2022 Last revised: 17 Oct 2022

See all articles by Ester Félez-Viñas

Ester Félez-Viñas

University of Technology Sydney

Luke Johnson

University of Technology Sydney (UTS)

Tālis J. Putniņš

University of Technology Sydney (UTS); 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. Our analysis shows significant price run-ups before official listing announcements, similar to prosecuted cases of insider trading in stock markets. 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 10-25% of cryptocurrency listings and as a lower bound, insiders earned $1.5 million in trading profits. Our findings identify cases that are yet to be prosecuted.

Keywords: Cryptocurrency, decentralized exchange, insider trading, listing announcement

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

Luke Johnson

University of Technology Sydney (UTS) ( email )

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

Talis J. Putnins

University of Technology Sydney (UTS) ( email )

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

Stockholm School of Economics, Riga ( email )

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

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