Insider Trading

[hatshepsut93]

If you don't know, insider trading is a practice on stock markets when people buy or sell assets while having access to some nonpublic information about the asset. The question is - is there non-public information about Bitcoin, and are some traders using it to their advantage?

My list of suspects:

Developers. They can tell about upcoming updates to some limited group of people at first, which will give them and edge over traders who don't know that information. Some bull runs might be caused by leaks about major updates. For example, we might see Lightning Network go live soon, and this might have been priced in already.

Miners. Miners have their bluff card called hard fork. It can really scare the market, allowing them to buy cheap coins, because the price will bounce back as soon as it will become clear that there won't be any fork. For example, there was a big crash before SegWit signalling period, as BTC dropped to $1,800 because of fears that the voting will fail.

Regulators. Remember "China will ban Bitcoin" FUD? People from regulating offices can use or leak information that will have a significant impact on the price.

Exchanges - they see deposit and withdrawal flows and can react to them. If exchange operator notices a huge incoming BTC deposit, they might assume that those coins will be dumped, so they might try to open short position before that big deposit gets confirmed. Exchanges can also have some influence on the market in chain split situations.

I think "buy the rumors, sell the news" is a much better method of trading than watching on charts and applying technical analysis, which is essentially gambling with some small positive EV if you do it right. 

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[1714782673]

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[heartastack]

Insider trading in crypto?

[Fortify]

It is an interesting question and with a globalized currency it is impossible to stop really. On top of all the areas where you identified weak links, you've got the ever changing laws of hundreds of countries that are not necessarily working towards the same goal. Even people who receive "insider" information may end up making big mistakes with their investments, you never know if your piece of detail will wreck or raise the price of bitcoin.

[audaciousbeing]

If you don't know, insider trading is a practice on stock markets when people buy or sell assets while having access to some nonpublic information about the asset. The question is - is there non-public information about Bitcoin, and are some traders using it to their advantage?

My list of suspects:

Developers. They can tell about upcoming updates to some limited group of people at first, which will give them and edge over traders who don't know that information. Some bull runs might be caused by leaks about major updates. For example, we might see Lightning Network go live soon, and this might have been priced in already.

Miners. Miners have their bluff card called hard fork. It can really scare the market, allowing them to buy cheap coins, because the price will bounce back as soon as it will become clear that there won't be any fork. For example, there was a big crash before SegWit signalling period, as BTC dropped to $1,800 because of fears that the voting will fail.

Regulators. Remember "China will ban Bitcoin" FUD? People from regulating offices can use or leak information that will have a significant impact on the price.

Exchanges - they see deposit and withdrawal flows and can react to them. If exchange operator notices a huge incoming BTC deposit, they might assume that those coins will be dumped, so they might try to open short position before that big deposit gets confirmed. Exchanges can also have some influence on the market in chain split situations.

I think "buy the rumors, sell the news" is a much better method of trading than watching on charts and applying technical analysis, which is essentially gambling with some small positive EV if you do it right. 

Insider trading has always been a potent part of the game and even in the fiat world that can be tracked not to talk of the crypto world where anonymity is the other of business and those people are not the only ones guilty, you didn't mention the admin sites of pump groups who has a lot of followers and knows before hand the coin to be pumped even before announcing to the group that's also an element or insider trading when looked at intuitively.

[1Referee]

Insider trading is part of this whole crypto economy. Seriously, everything happens with a reason, and that reason is the financial benefit they gain from doing or saying something. I personally don't mind it, as long as it is just you knowing something that might push the market fowards or downwards, and thus you anticipate by buying or selling. I however don't like how certain entities are perfectly fine with using Bitcoin as collateral damage for their own financial gain, where they abuse their economical majority position in the mining industry. That's just a nasty practice. At some point when more and more regulations are being put to work in the crypto world, even the innocent looking forms of insider trading will be seen as a serious offence.

[CyberKuro]

Developers? They maybe know what will happen about the development of bitcoin, which one will be implemented or not, just like segwit2x hard fork.
Look at unconfirmed transactions https://blockchain.info/unconfirmed-transactions that have decreased after segwit activated.
Miners have big role and may influence bitcoin price as they hold big portion of bitcoin, generated by mining activity every day, 24 hours and 7 days a week. But, 2 suspect which could manipulate bitcoin price, decide to buy and sell at he right time are big whales and exchanges. Exchanges could set certain price at their will, if they want to sell BTC100-BTC500 at one time when bitcoin reach $5000, in the next hour, the price will decline to $4700.
They are insider traders, exchanges itself.

[aso118]

Can you have insider trading in unregulated markets? The power to prosecute traders who act on inside information, will be derived from some law. If that law is not broad enough, crypto traders might get away with trading on inside information.

[alyssa85]

Can you have insider trading in unregulated markets? The power to prosecute traders who act on inside information, will be derived from some law. If that law is not broad enough, crypto traders might get away with trading on inside information.

This. Cryptocurrency is unregulated, and as long as that is the case, there will be market manipulation. Part of the reason the SEC refused to approve the Winklevoss ETF was because they felt that bitcoin's price was subject to manipulation on unregulated exchanges.

[Kemarit]

As fraudulent as this practice maybe, it can't really be stop because of the unregulated design of bitcoin. It is also impossible to detect insider trading and even if you were caught its really hard to prosecute those who practice it. So for me, since its really hard to detect it, at least it should not be ban IMHO.

But in the point of a investor, I will lost confidence in the market unless I know that I'm competing on a level playing field. I guess we need to be immune in this kind of practice, however, I still believed that we needed it specially in the crypto market.

[hatshepsut93]

As fraudulent as this practice maybe, it can't really be stop because of the unregulated design of bitcoin. It is also impossible to detect insider trading and even if you were caught its really hard to prosecute those who practice it. So for me, since its really hard to detect it, at least it should not be ban IMHO.

But in the point of a investor, I will lost confidence in the market unless I know that I'm competing on a level playing field. I guess we need to be immune in this kind of practice, however, I still believed that we needed it specially in the crypto market.

I personally don't think that insider trading is inherently wrong or should be illegal - this is not like stealing money from someones pockets, because people voluntarily agree to participate in open market. If there is demand from people for regulation (because they view such practices as fraudulent), it is possible to create voluntary regulation inside Bitcoin economy - i.e. exchanges setting up their own rules for the benefit of the market and not because the government told them. The question is, do people really want it, or maybe everyone is okay with totally unregulated markets?

Insider trading has always been a potent part of the game and even in the fiat world that can be tracked not to talk of the crypto world where anonymity is the other of business and those people are not the only ones guilty, you didn't mention the admin sites of pump groups who has a lot of followers and knows before hand the coin to be pumped even before announcing to the group that's also an element or insider trading when looked at intuitively.

Pump groups are not the same as insider trading, since they only influence price via market means. In traditional markets this treated as separate form of fraud.

[CryptoBry]

It is an interesting question and with a globalized currency it is impossible to stop really. On top of all the areas where you identified weak links, you've got the ever changing laws of hundreds of countries that are not necessarily working towards the same goal. Even people who receive "insider" information may end up making big mistakes with their investments, you never know if your piece of detail will wreck or raise the price of bitcoin.

It is possible to gain some insider information on Bitcoin...meaning to say information not yet known by the public or by the media. However, there is no assurance that such an information will affect Bitcoin because there are instances when a big news is just shrugged off by the market. In other words, information is just a tool here and we don't know how the market will behave once that information is already out.