It’s no secret that besides many new ideas and capabilities brought forth through cryptocurrency, insider trading has similarly been made possible through new and more covert methods than before. Anonymity, decentralization, and ownership of assets have, for better or worse, enabled insider trading across cryptocurrency markets through a variety of avenues.
From private trading groups coordinating dumps onto social media followers to government officials trading based on anticipated regulatory action, insider trading has been alleged to have taken place in almost all facets of cryptocurrency. Whether it’s team members betting big on an upcoming announcement or individuals catching wind of an upcoming major exchange listing, some speculators have suggested that much of the market activity is precisely the product of said insider activities. Let’s take a look at how various projects have reacted to recent major insider trading allegations.
Over the course of the last two weeks, KickCoin has tripled in price due to significant buy pressure by insiders in anticipation of a major announcement. These rumors were supported by a leaked whitepaper and new job listings on KickCoin’s site. The whitepaper alluded to a new project that KICK holders will receive airdropped tokens for.
The KICKICO team responded using a quite unorthodox approach. In an article linked from Twitter by the Head of Community, the team explained that in a decentralized, community-driven environment such as KICK, information leaks, and therefore insider trading is simply not possible. It is explained that information is spread freely to active community members who put their efforts into the project, as there is no upper management to keep information to themselves. With that, anyone who is active, passionate, and helpful with regard to the project deserves the right to buy and sell tokens as they see fit, even if it’s done in anticipation of a major event.
For much of the 2018 bear market, Skycoin was a top performer. After reaching lows below US$10 in early March, the coin’s price saw a steady climb upward for the next two months, and it approached $25 towards the end of May. Days later, when Skycoin was listed on Binance, the coin instantly shot to $35 before crashing, hard. One month later, SKY was trading for just US$6, and has yet to recover significantly.
Allegations suggested that insiders with knowledge of the upcoming Binance listing had accumulated SKY to dump upon the listing’s going live. As is well known, the Skycoin team are quite a different bunch, and they carry themselves more like internet trolls than executives of a multi-million dollar network. The reaction to the allegations were not out of character. The CEO was recorded mocking the producers of said allegations, implying sarcastically that it was asinine to suggest that such a thing had taken place. However, his voice recording was taken out of context to convey a different message – that they were aware of insider trading. Community members have blamed administration at Binance for any potential foul play, although it’s uncertain whether there was an insider influencing the price movements.
In December 2017, Bitcoin Cash (BCH) was listed on Coinbase. As could have been expected, this sent the price of the Bitcoin fork to all-time highs of US$4,000. There had been rumors in days prior that a listing would take place, even though Coinbase did not announce it prior to the listing itself. In the days leading up to the pump, BCH had continued to rise in price.
On the day of the listing, Bitcoin Cash instantly pumped to $9,500 before Coinbase froze its market, valuing BCH far higher than other exchanges. Allegedly, Coinbase sold its Bitcoin Cash reserves across other exchanges at the US$4,000 premium (and higher on some exchanges), and this was made possible by the inflated valuation cemented on Coinbase. Major proponents of Bitcoin Cash have not had much comment on the incident, although it is uncertain whether or not they have knowledge of what reportedly took place. Coinbase, on the other hand, was slapped with a lawsuit regarding insider trading of BCH, which is still ongoing.