A new study from the researchers of one of Australia’s prominent universities found out that insider trading has occurred on as much as 25% of Coinbase listings since 2018.
Three finance researchers from the University of Technology in Sydney, in their research paper entitled, “Insider Trading in Cryptocurrency Markets” claims that insider trading is “systemic” in the cryptocurrency market.
Researchers findings
The study by Professor Ester Felez Vinas, Professor Talis Putnins, and PhD candidate Luke Johnson, however, has not yet been peer-reviewed.
Their paper claims that their “analysis shows significant price run-ups before official listing announcements.”
The paper estimates that 10 to 25% of cryptocurrency listings on Coibase, a San Francisco-based exchange, experienced insider trading between September 2018 and May 2022. This resulted in an illicit income of at least $1.5 million.
“We leverage blockchain data to identify specific wallets (individuals) involved in such trading, providing more direct evidence than is possible in most empirical analyses of stock markets,” according to the paper.
What is insider trading
Insider trading, according to the Oxford dictionary, generally refers to “buying or selling a security.” It occurs when trading participants use confidential information. Thus it is punishable in most jurisdictions.
The three researchers looked for abnormal trading patterns of the assets in question on decentralized exchanges (DEXs), which do not require identity verification. To do this, they examined 146 Coinbase listings and tracked their prices between 300 and 100 hours before each new listing went live on the exchange.
“From visual inspection, we note that there is an evident run-up pattern prior to the listing announcement starting at -250 hours. The run-up continues until the listing announcement event, where we see a jump in price because of new information entering the market and traders reacting to the news. The run-up pattern we observe is consistent with the run-ups in prosecuted cases of insider trading in stock markets,” the researchers stated in the paper.
Not new to Coinbase
Allegations of insider trading have already been made with Coinbase listings. Former Coinbase product manager Ishan Wahi has just been charged by the U.S. Justice Department with charges related to suspected insider trading while employed by the business.