According to a recent study conducted by the University of Technology Sydney, researchers estimated that insider trading occurs in between 10% and 25% of new cryptocurrency listing announcements on exchanges.
To reach this conclusion, the researchers first took a sample of 146 cryptocurrency listings on Coinbase between September 25, 2018 and May 1, 2022. The researchers then examined the price movements of the sample tokens in the time interval from 300 hours before the announcements of their arrival at Coinbase to 100 hours after the announcement, across various exchanges.
The hypothesis was that, if it was insider trading, tokens that are also available for trading on decentralized exchanges, or DEXs, prior to listing would see abnormal gains compared to those that are not on other DEXs. The researchers claim that such abnormal levels were seen with statistical significance in 10% to 25% of the tokens studied, and that the price patterns in DEXs immediately prior to the Coinbase listings were similar to the “ramps” witnessed in the DEXes. Known cases of insider trading in the stock markets.
Also, a small subset of the aforementioned DEX wallet addresses are suspected of amassing and quickly selling the tokens after they were listed on Coinbase. The study in draft status has not been reviewed by other parties.
These types of studies are often limited by their ability to demonstrate causality as well as correlation, or that abnormal returns in the study can be definitively attributed to users with non-public information being obtained early. Albeit coincidentally, around the same time the document was filed, the US Department of Justice charged a former Coinbase executive with insider trading. He has since pleaded not guilty.
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