[HN Gopher] Crypto Might Have an Insider Trading Problem
___________________________________________________________________
Crypto Might Have an Insider Trading Problem
Author : IdEntities
Score : 112 points
Date : 2022-05-21 14:03 UTC (8 hours ago)
(HTM) web link (www.wsj.com)
(TXT) w3m dump (www.wsj.com)
| exdsq wrote:
| When I worked in crypto I knew news before release and, if I
| wanted, could trade on it. If there was a delay it'd almost
| always cause a minor crash, so I could short. On the other hand
| big investors or collaborations would give the price a hike. All
| perfectly legal, but I didn't for ethical reasons.
| vegai_ wrote:
| Nooo way, really?
| BonoboIO wrote:
| I m shocked
| lb1lf wrote:
| As it goes in 'Casablanca' -
|
| Capt. Renault - "I am shocked, shocked to find that gambling
| is going on in here!"
|
| (Croupier hands him a neat pile of money.) "Your winnings,
| Sir"
|
| Renault - "Oh, thank you very much!"
| jrm4 wrote:
| Of course it does. But if you're thinking that e.g. the stock
| market is any better, you're _wildly_ naive. In the stock market,
| the griminess has been developed and institutionalized, and still
| gets away with silliness like "dark pools."
|
| Crypto is also very much a mess in this regard, but you have a
| much greater shot at fairness, given that to some extent,
| blockchains must be visible and open.
| [deleted]
| curiousgal wrote:
| I mean the list of common types of market misconduct that have
| been outlawed by regulators are a play book for crypto markets
| (spoofing, frontrunning, insider trading, etc) why wouldn't they
| be?
| notacoward wrote:
| You forgot "pump and dump" which is practically the _essence_
| of how crypto works in the real world. Also money laundering.
| tyrfing wrote:
| Chamath did it better. Even in the stock market it's not a
| crime to make billions peddling nonsense to retail.
| martin8412 wrote:
| Buying/selling artificially inflated art to conceal where the
| money came from indeed
| cde-v wrote:
| I thought this was a feature of crypto, not a bug?
| throwawayfora wrote:
| Go to a place where product managers and engineers from Coinbase
| and Robinhood go for breakfast, lunch, dinner, alcohol, or coffee
|
| They are very open about insider trading
| jiveturkey wrote:
| Are COIN and HOOD WFO companies?
| jollybean wrote:
| Large swaths, possibly even the majority of crypto/NFT trading is
| wash trading i.e. people selling stuff to themselves to prop up
| the market.
| ChainOfFools wrote:
| Turns out that anonymity of market actors and decentralization
| of market behavior are completely orthogonal objectives. Who
| knew?
| pengaru wrote:
| When I briefly paid attention to Monero/XMR and ran a mining rig
| it was glaringly obvious that every time they changed the
| algorithm, something Monero deliberately did(does?) regularly for
| anti-ASIC reasons, those participating in the development would
| have their miners active effectively across the changeover with
| zero down time.
|
| It seemed pretty close to insider trading to me. While the
| network was getting back to its previous aggregate hash rate the
| difficulty would be exceptionally low, so everyone closely
| involved had a window of easy mining every time the algo changed.
| It would take days for the aggregate hash rate to recover 100%...
| Blahah wrote:
| It's not insider information because the information is
| accessible and discoverable. Anyone who wants to can follow the
| development plans, run their own nodes, pull and build the new
| branches, etc.
|
| There's certainly a lot of insider trading (adjacent) bad
| behaviour in crypto generally, but the example you've given is
| the opposite.
| gruez wrote:
| I don't buy it. I'm not intimately familiar with how the monero
| project is run, but shouldn't you able to pick this up by
| looking at the PRs? Or are the repository owners just keeping
| their PRs under wraps and merging them immediately after
| they're created? Even then, the bigger question is how these
| changes get deployed. If you're going to change the hashing
| algorithm, you'll probably have to get most clients on the
| network to update in advance, otherwise all the people running
| outdated clients would be on a forked chain. Therefore it seems
| unlikely that monero insiders would have much of an advantage
| compared to an observant outsider.
| pengaru wrote:
| It just comes down to how we define "insider" in this
| scenario.
|
| This was years ago now, but at the time at least this wasn't
| an automated mechanism. So yes, you could follow the
| repository and pay very close attention, and if you're savvy
| enough maybe even automate that process to deploy the new
| miner whenever changes landed. (mine often broke by amdgpu
| opencl incompatibilities though, it often took some hacking
| to make the new algo work)
|
| But from where I was sitting it was very clear that the
| manual nature of it created tons of opportunity for the
| developers and those savvy and close enough to practically be
| in the same privileged set as developers.
|
| Whenever they changed the algorithm the network reset and the
| hash rate was a tiny fraction of its previous quiescent
| state, with a low difficulty, for _days_. I was paying semi
| close attention at the time, and even being purely manual
| with a single eGPU mining rig was able to somewhat capitalize
| on the opportunity created.
|
| Practically all my pittance of shares were mined in post-
| reset low difficulty periods. Those with actual large mining
| farms normally competing with the full rate difficulty surely
| were quite productive in those windows.
|
| There's no question that the switchovers would kill the hash
| rate, we can infer from that most the miners were being
| manually maintained by folks not closely monitoring the
| upstream repo for every change.
| xur17 wrote:
| Agreed. The network would grind to a hault if the mining
| algorithm was changed without notifying everyone first. I
| have to imagine a new version of the node software is
| released (fork) that changes the hashing algorithm starting
| at X block. Anything else would be.. stupid.
| pengaru wrote:
| When your currency intends to keep changing the algorithm,
| the protocol itself should describe the algorithm to use
| and automate the changeover process. It's not the manual
| aspect that is defending against ASIC miners, it's the non-
| determinism of what the algorithm is going to be.
|
| If you keep it that way for years, it starts looking _very_
| deliberate. In this scenario I 'd describe the "insiders"
| as those participating in and following monero's
| development closely enough to be continuously aware of
| these changes at the source level. We're not talking about
| SEC regulated crap where insider trading is well defined,
| this is all unregulated wild west software land. Insiders
| are the nerds cloning git repos and building from source,
| lurking in monero chat rooms all day, etc.
| cryptobonanza wrote:
| "Might"? There is insider trading going on. An anonymous person
| that is most definitely not me (and wishes to specifically
| distance themselves from any of this activity) is in a high role
| in finance and has seen with their own eyes a business partner
| buying tokens for $0.02 in secret presale rounds which were then
| listed on all major exchanges starting at $0.30 to $0.50 and then
| obviously immediately dumped on retail buyers.
|
| The anonymous person has told me this is not even a real secret,
| it's an open secret in DeFi and that for some reason all the
| other "investors" do either not care or just accept it and that
| it happens with every single "project"
| scotty79 wrote:
| Creators of DeFi take money for nothing from other investors.
| That's not insider trading, that's minting.
| jiveturkey wrote:
| I think the "might" refers to "problem", not whether it's
| occuring. per your example, the dramatic anonymity and call to
| authority is not required. front-running is well known about,
| it's not a secret.
| cryptobonanza wrote:
| I'm sorry, but there is no call to authority, the person is
| merely sharing something, and anonymity is a personal choice.
| As mentioned, the person in question works in a high position
| in finance, and should not be giving out details about
| operations and operations of business partners. Even if the
| practice is an open secret in cryptocurrency "investment
| groups", any kind of association to their person, their role
| or the (legal) operations themselves is to be avoided. It's
| also surprising to me that choosing anonymity would be
| scrutinized on Hacker News.
|
| What is being described here is not front-running.
| influxmoment wrote:
| Yes this is completely standard for all crypto projects. And
| then next step is to buy a positive news articles and an
| exchange listing. And when it comes to the
| technology.....lol...well what technology their money is made
| cryptobonanza wrote:
| > And then next step is to buy a positive news articles and
| an exchange listing
|
| I can also attest to this happening.
| BaseballPhysics wrote:
| It's because the assumption is that regular markets work the
| same way and we just don't talk about it.
|
| Your can mention regulation until you're blue in the face but
| it won't matter because for many crypto is the antedote to a
| conspiracy theory they've been literally sold.
|
| And the worst part is: as with all conspiracy theories, there's
| a grain of truth in there--fraud and insider trading absolutely
| does happen in tradfi!--which makes it that much harder to
| convince these folks they're wrong.
| ineedasername wrote:
| Yes, I think for some folks the appeal of crypto is that it
| seems possible to get in on the con and themselves. Try to
| find some shitcoin or get tight with a group that's going to
| launch something to buy it an pre-public rates. It's not
| "crypto is more open so it can't happen" it's "they're all
| scams and here's my chance to fleece some other sucker."
|
| I wouldn't paint _all_ of crypto with that brush, but
| certainly a large proportion.
| tialaramex wrote:
| > it seems possible to get in on the con and themselves
|
| Most confidence tricks involve this. I actually find the
| rare tricks which rely on the mark's _honesty_ to be more
| interesting because you need a strategy more complicated
| than just "Don't be dishonest" to avoid losing.
| danaris wrote:
| Frankly, from what I've seen, I suspect that more than 50%
| of the valuation of most cryptocurrencies comes from people
| with that mindset.
| [deleted]
| arcticbull wrote:
| > I wouldn't paint all of crypto with that brush, but
| certainly a large proportion.
|
| I would.
| MomoXenosaga wrote:
| All the crypto shills and influencers who never declare
| their personal holdings really annoy me.
| cryptobonanza wrote:
| 90%+
| arcticbull wrote:
| 90% + 10% :)
|
| I'm sorry but its been almost _fourteen years_ and not a
| single mainstream product has come out of this so-called
| revolutionary technology. Zero.
|
| For the entirety of the last 10 years I've been hearing
| how blockchain is the "internet of the early 90s" - well
| by now it should be the internet of the early 2000s, but
| it's still the "internet of the early 90s" according to
| proponents.
|
| It's time to stop and ask yourself: what if it's just not
| that revolutionary after all? What if a really slow
| database isn't a solution to all our problems?
| dredmorbius wrote:
| I see such usages as goverened more by either 1) concern over
| libel or similar lawsuits or 2) strong but not absolute
| evidence. Possibly in the case of 2), the evidence exists, but
| disclosure would compromise or endanger the source.
|
| That said, yes, the headline eyeroll is warranted.
| px43 wrote:
| That's not how order books work. New tokens don't get listed at
| some pre-determined price. People who buy up tokens in pre-
| sales are allowed to move their tokens onto exchanges, and list
| them for sale for whatever price they want.
|
| Obviously they're looking to sell them for more than they got
| them, but more often than not, the general public doesn't care
| enough to buy them at higher than the pre-sale price. There's
| significant risk involved when participating in pre-sales. It's
| not like it's just a free money free for all. Those are the
| ones you don't hear about because no one is in the office
| bragging about how much money they just lost.
| SparkyMcUnicorn wrote:
| He said DeFi, and buying at a specific price is how a lot of
| presales work there.
| px43 wrote:
| Exchange listings, which is the topic of the article, and
| is mentioned by the person I responded to, are specifically
| a centralized finance thing (CeFi).
|
| Every DeFi exchange I know of allows anyone to list any
| token at any time. That's part of what makes them
| "decentralized", so the concept of knowing ahead of time
| when a token is going to be listed doesn't make any sense
| in the DeFi context.
|
| Pre-Sales are often conducted via a DeFi style ICO, which
| might list tokens at a certain price governed by some fancy
| mechanics (getting cheaper, or more expensive, over an
| n-week ICO window or something, dutch auctions, etc), and
| then eventually the tokens go up for sale on centralized
| exchanges, which is the "insider" event being discussed by
| the article, and presumably, the person I replied to.
| stepanhruda wrote:
| If they add liquidity at Uniswap, they do indeed get listed
| at a pre-determined price. The initial liquidity is added at
| a 50/50 ratio with an existing highly liquid asset, so the
| number of coins the initial liquidity providers have directly
| sets the price - of course the immediate dump/demand quickly
| swings the price.
| whateveracct wrote:
| Dfinity, for instance, is being sued for this sort of untoward
| financial behavior: https://cryptobriefing.com/lawsuit-claims-
| dfinity-icp-token-...
|
| Hilariously, Dfinity is now suing Meta for its new logo (which
| looks like an infinity sign too). Obviously a silly lawsuit,
| but now googling "dfinity sued" is all about Meta and not about
| their being sued. Scuzzy.
| snthd wrote:
| Is there a word for doing things IRL designed to overlay
| historical search results?
|
| A "red bus cheese party"?
| encryptluks2 wrote:
| _Cough_ ... Algorand... _cough_
| fragmede wrote:
| Pedantically, is that insider trading, or is there a different
| name for that? IPOs work the same way - insiders get granted
| shares at pennies on the dollar, and then on IPO day the
| company sells shares, and allows insiders to sell their shares
| (after the lockup period expires), a process that has created
| millionaires a million times over.
| Animats wrote:
| This becomes much more of an issue as "line goes down". The
| normal progression in NFTs now is that the minters make money,
| and the suckers who bought with intent to resell lose money.
| wslh wrote:
| If you can't see the whole article: Archive to the rescue:
| https://archive.is/njixG
| martin8412 wrote:
| Gasp!
|
| An industry where lots of people get to learn why 100+ years of
| financial regulations exist..
|
| They're speedrunning centuries worth of financial scams.
| nathias wrote:
| we know exactly why financial regulations exists, that's why
| we're in crypto
| superfrank wrote:
| In 2018 I worked with a developer who offhandedly said "cypto
| will teach libertarian tech bros why banking regulations exist"
| and it's stuck with me ever since.
| alangibson wrote:
| You left out how they're also speedrunning 100 years of
| financial crises due to forgetting everything learned about
| money in the 20th century.
| IdEntities wrote:
| I wouldn't say a whole lot was learned about money in the
| 20th Century given that the Secretary of the Treasury wound
| up on his knees begging the Speaker of the House to pass a
| bailout bill in 2008 to forestall an apocalyptic financial
| collapse. The jury is still out on this but it's possible all
| that was discovered was new ways to kick the can to an even
| bigger crisis down the road.
| arcticbull wrote:
| > I wouldn't say a whole lot was learned about money in the
| 20th Century given that the Secretary of the Treasury wound
| up on his knees begging the Speaker of the House to pass a
| bailout bill in 2008 to forestall an apocalyptic financial
| collapse.
|
| (a) what does this have to do with monetary policy? the
| bailouts were run by Treasury and were strictly fiscal
| policy. this isn't really something we learned about money.
|
| (b) bailouts were loans not grants, and not only has the
| entire balance of the loans been repaid, the government
| netted a tidy profit ($109B) - and there's more left. [1]
|
| [1] https://projects.propublica.org/bailout/
| civilized wrote:
| I just don't understand how there can be a profit. TARP
| was created to pay companies holding toxic mortgages and
| other worthless assets. How is it that the government
| pays for worthless assets and makes a profit?
|
| I think the financial masters of the universe have found
| some way to screw us and it's just hiding in some
| accounting tricks.
| IdEntities wrote:
| The real loss is in the lower rates at which the
| financial companies with a now-explicit government
| backstop are able to borrow money. That's a subsidy worth
| hundreds of billions of dollars per year which is never
| included in this sort of accounting.
| deathanatos wrote:
| > _[1]https://projects.propublica.org/bailout/_
|
| > _In total, the government has realized a $109B profit
| as of May 13, 202. (sic)_
|
| ...how do such colossal, above the fold mistakes like
| this get made by big name publications. While I actually
| do believe you're correct here, I'm hard pressed to trust
| the data with that kind of lack of any sort of review.
| IdEntities wrote:
| Right, so, what everyone "learned" is that you can
| leverage yourself to the gills, enjoy the fruits of debt-
| fueled asset appreciation on the way up, and when it all
| goes pear shaped the government will be able to step in
| and clean up the mess and get the whole cycle started
| again.
|
| The fiscal bailouts became necessary because the Fed had
| fired all of its monetary policy bullets and it had
| failed to arrest the collapse in confidence which was
| freezing credit markets.
|
| Like I said, the jury is still out. Maybe the next time
| will go just like 2008. Maybe there really _will_ never
| be any price to pay for all this moral hazard that 's
| being stuffed into the system.
| logicalmonster wrote:
| I think pretty much every market has insider trading going on.
|
| The difference with Crypto is that because there's an actual
| record of transactions, there's at least a chance for the public
| to catch onto shady looking behavior that manipulates the price
| of an asset.
|
| A lot of people falsely think the stock market is heavily
| regulated and pure. It's not. You can't even find out a
| definitive answer as to how many shares of a stock currently
| exist. Crypto is infinitely superior in many respects.
| umanwizard wrote:
| > You can't even find out a definitive answer as to how many
| shares of a stock currently exist.
|
| What do you mean? I can google this for any public stock and I
| get answers; are you claiming they're wrong?
| logicalmonster wrote:
| Short selling.
|
| Shares are "borrowed" for a fee and flood into the market.
| Voila, buyers now have to buy a bunch of new shares that
| shouldn't exist just to keep the price level. Unethical hedge
| funds have made a living essentially tanking companies by
| borrowing loads of stock, selling at a high price and
| flooding the market with far more shares than should exist,
| tanking the stock price making the company having far more
| problems raising money (and killing off some of them). The
| borrowed shares are returned when the price tanks at a much
| cheaper price. This is bad for the world when it's just some
| weaker retail outlet being dumped, but devastating if it's
| some biotech firm researching medical cures being hamstrung.
|
| Now, there's supposedly some regulations and disclosures for
| this like the Short Interest stat that are usually published
| I think twice a month. But this is time delayed and
| manipulatable.
|
| Here's an interesting anecdote about this in an OTC market: h
| ttps://www.reddit.com/r/Superstonk/comments/rsaevv/in_march..
| .
|
| > In March of 2005 this guy bought 100% of shares (1.1M
| shares) in a traded company to prove the corruption. The next
| two days that same stock traded 50 million times and dropping
| the price 99% in two hours. All this with LITERALLY NO SHARES
| AVAILABLE TO BORROW OR SHORT.
| rspeele wrote:
| Can you explain this part to me?
|
| How does selling a ton of shares into the market move the
| price down, but buying an equal number of shares back to
| complete your short doesn't move it back up?
|
| Is this not a double-edged sword? If you dump enough shares
| that you actually affect the market price, you'll have to
| do the same thing on the way back.
| logicalmonster wrote:
| This is an actual good question which I'd offer a few
| answers for, and I'm sure there's other partial
| explanations as well.
|
| 1) In an ideal world, the tactic tanks the price enough
| that investors don't support the company, they have
| trouble raising capital, and go out of business and the
| borrowed share (I believe) either never has to be repaid
| or is trivial to recover.
|
| 2) When you're dealing with really big money and want to
| enter or exit a position without affecting the price too
| much, you don't just go to your stock broker and enter a
| buy or sell order for however many shares you're dealing
| with. You use experienced people and automated algorithms
| to time the deals to have as minimum an impact on the
| price as possible and enter/exit smartly.
|
| 3) Dark pools exist for making orders that don't impact
| the public price.
| https://www.investopedia.com/terms/d/dark-pool.asp
| rspeele wrote:
| If I can use methods like 2 or 3 to make huge orders
| without moving the market, why bother shorting?
|
| Couldn't I use this to make easy profits on longs?
|
| Say "X" is the method to place orders that don't affect
| the price.
|
| 1. Buy 5 million shares via X, at the current low price
|
| 2. Buy 5 million more shares via my stock broker, pumping
| the public price
|
| 3. Sell all 10 million shares via X, all at the new high
| price
|
| My guess would be that the organizations you deal with
| through these dark pools or whatever discount your trades
| based on the perceived advantage you're getting by not
| making them public. If the public price is $100, and you
| want to sell a jillion shares through a dark pool, nobody
| is going to offer you better than, say, $98 per share or
| whatever their quants have calculated as a fair price for
| a sell that big. Likewise if you wanted to buy a jillion
| they'd ask for $102 or so.
|
| There can't be a free lunch here.
| salawat wrote:
| ....Short selling doesn't create new shares. You're
| borrowing some from someone who owns them already for a
| price point which you then sell in the expectation the
| share price will drop, meaning you can buy back the shares
| you borrowed cheaper, pocketing the difference.
|
| Unless you're talking 'naked shorting'. Which is illegal.
| Though I'm not sure to whose overall benefit.
|
| https://www.investopedia.com/terms/n/nakedshorting.asp
|
| I make no judgement on it's relative virtue.
|
| From an information theoretic point of view, if you audit
| the holdership of all outstanding isuued shares you will
| see more orders of involved shares than there are actual
| sellers that can complete the transaction. These other
| orders are tracked as FTD's, but may constitute a negative
| sentiment signal to other actors in the market.
|
| Realistically speaking though, it's basically a Stock
| Market version of a smear/negative advertisement/marketing
| campaign. Someone burned money to create the appearance of
| a lack of confidence in a security. The fact it's illegal
| is arguably a free speech violation.
|
| Whether you act on the naked shorting's distortive info is
| entirely up to you.
| Closi wrote:
| Short selling doesn't create new stocks, so as per the
| parent comment, what do you mean you can't tell how many
| shares of a company are issued?
|
| It feels like you have just changed the question from your
| original claim that "You can't even find out a definitive
| answer as to how many shares of a stock currently exist" -
| when the answer is easy, go to any website and divide
| market cap by share price.
|
| Want to find out what is shorted? Go on any website that
| has a stock quotes service or find the short interest
| ratio, which is declared at least twice a month for
| American assets. On the other hand, how would you see how
| many short positions exist for BTC considering that it is
| traded across multiple exchanges?
| logicalmonster wrote:
| > Short selling doesn't create new stocks,
|
| Short selling never creates new legal shares with voting
| rights: but they do exist in the marketplace until that
| position is closed. This means that this artificial share
| affects the price per share, does it not?
|
| > the answer is easy, go to any website and divide market
| cap by share price.
|
| This is a chicken and egg calculation. How is market cap
| computed? Market cap is computed by taking shares x price
| per share.
|
| But if you have an unknown number of borrowed shares in
| the market, then this entire calculation is unreliable.
| The only reliable number that exists in stock trading is
| the current price per share.
|
| > declared at least twice a month for American assets.
|
| It seems like you see twice a month as a good thing. I
| think it's a bad number that can be easily manipulated.
|
| > On the other hand, how would you see how many short
| positions exist for BTC considering that it is traded
| across multiple exchanges?
|
| Absolutely perfect information about all of reality would
| probably never exist, but you have a blockchain you can
| look at in real time, you have exchanges that publish
| wallet addresses and other information that can be
| monitored to see reserves, inflows, and outflows. IMO,
| there's a bit of some kinds of disclosure possible with
| crypto that cannot exist with stocks.
| Closi wrote:
| > But if you have an unknown number of borrowed shares in
| the market, then this entire calculation is unreliable.
|
| You have perfect knowledge of the number of actual issued
| shares, plus a 2 weekly disclosure on the number of
| borrowed shares.
|
| > Absolutely perfect information about all of reality
| would probably never exist, but you have a blockchain you
| can look at in real time
|
| How does the BTC blockchain, as an example, show short
| positions? (Hint: it doesn't, it requires disclosure by
| centralised exchanges in exactly the same way, except
| these disclosures are entirely unregulated and spread
| across many exchanges).
|
| Sounds like this is a criticism of stock exchanges that
| is again worse in the cryptocurrency/blockchain magic
| world.
| NovemberWhiskey wrote:
| How do you think the SEC identifies insider trading? Do you
| think there's no "actual record of transactions" in non-crypto
| markets?
| logicalmonster wrote:
| To give one small point within a very complex and nuanced
| topic that people could write a hundred books about...
|
| Financial disclosures in stocks are typically required to be
| filed within 30 days. As we know in investing, timing is
| everything. The financial disclosures that exist IMO mainly
| serve to placate the masses that there's regulation and are
| worthless for knowing about actual problems or impending
| price movement.
|
| With crypto, big movement of assets happens on a blockchain
| and can be observed in real-time. There's at least a chance
| of catching issues in a way that can't be replicated with
| stocks.
| salawat wrote:
| You have this, so, so wrong.
|
| Insider trading isn't X sold stocks at Y.
|
| Insider trading is X arranged to sell stocks at Y based off
| of information disclosed from internal actor Z that was not
| publically knowable at the time of initial communication.
|
| It's about having a traceable privileged internal source
| that no one else did. Both the source and the trader are
| then culpable. Nothing about order stream makes it clear
| insider trading happened. It's about communications and
| things that happened before the trade that make insider
| trading.
|
| Trading in ones own shares as an executive is often treated
| with extra care because you are the ultimate insider, and
| you are also burdened with a responsibility that should
| prevent you from shorting your own stock (shorting as an
| exec signals either regulation on the horizon, or somebody
| hasn't been doing their fiduciary due diligence).
| logicalmonster wrote:
| I was responding to the second part of NovemberWhiskey's
| post. Repeating a dictionary definition of insider
| trading isn't an interesting point for me so I ignored
| that part of the post.
| balaji1 wrote:
| > there's at least a chance for the public to catch onto shady
| looking behavior that manipulates the price of an asset
|
| but can we do anything about it even if you catch the behavior?
| other than old-school regulation and litigation? and eventually
| add checks and balances
|
| > You can't even find out a definitive answer as to how many
| shares of a stock currently exist
|
| maybe there are better models of stock exchanges? (hopefully
| looking at Europe, or at least in the past)
| djbebs wrote:
| Insider trading is arguably a good thing. It makes markets more
| efficient, and puts everyone on an even footing.
| ohyoutravel wrote:
| Whatever the news story is, it's somehow good for crypto!
| mattfrommars wrote:
| Basically, something that happens in traditional finance/IPOs but
| considered OK. Insider knowledge of knowing when a company will
| do IPO to get maximum return on their investment and cashing out
| when company goes public after great public showing. Only
| difference between the traditional run of the mill companies that
| go on IPO with massive valuation and what crypto coins do when
| they go 'public', is that with IPO case, it is socially
| acceptable for people to game the system.
|
| There are numerous example from IPO bonanza that took place last
| year where investor did exactly the same and now their stock have
| reached rock bottom. Whatever value those companies had, the
| 'insider investor' had their pay day, now its left to rot in
| public domain. Fantastic.
| usui wrote:
| I read the article.
|
| What's the financial incentive for a company to actually enforce
| "insider trading" rules to its employees? In fact, what does
| "insider trading" even mean in this context? Shouldn't that be
| defined by a central authority?
|
| When I read the title, it was, "No shit? What do you expect in an
| unregulated market by design?"
|
| I realize that "lots of insider trading is obviously happening,
| naturally" is a big statement and unfalsifiabe, so going in the
| other direction is more logically sound.
|
| On other hand, I can't help but feel it doesn't need to be
| proven. Unregulated economics is in the design! Maybe we just
| need more articles like this to prove the trend, but do we still
| feel the need to prove it? It reminds me of the way scientific
| consensus fought and eventually converged on "smoking causes lung
| cancer", even though that wasn't agreed upon at the beginning
| because monied interests disagreed. But it was like... well,
| you're burning toxic chemicals inside your lungs, it's in the
| design isn't it?!
|
| Which take makes more sense currently?
| NelsonMinar wrote:
| That was sort of my reaction to: "why yes, of course this
| unregulated market has bad actors ripping off other people".
| But consider the WSJ audience and the way cryptocurrency is
| increasingly being peddled as a legitimate investment. Insider
| trading steals money from end retail investors and gives it to
| powerful insiders. It is actively harmful to ordinary
| investors. Ultimately markets that tolerate this kind of fraud
| fail as people get mad about being the sucker who gets ripped
| off and refuse to participate.
|
| Compared to the other kinds of fraud endemic to cryptocurrency,
| the risk of a corrupt market is a slow burn. Probably the Ponzi
| scheme will collapse or the rug will be pulled or the contract
| will be hacked long before the sheep realize they are being
| fleeced by insiders.
| ineedasername wrote:
| That's a good point. Those following from a crypto disaster
| journalism vantage point will view this story as "yes, and
| water has been know to be wet on occasion, and the sun to
| come up on quite possibly every day."
|
| But if your exposure is more from following tradition financi
| news, you may have seen some of the disasters and certainly
| volatility but otherwise may seem like a gradually emerging
| but not quite mature new asset class.
| PheonixPharts wrote:
| > eventually converged on "smoking causes lung cancer", even
| though that wasn't agreed upon at the beginning because monied
| interests disagreed.
|
| tangential "Fun fact":
|
| The origin of the phrase "correlation does not imply
| correlation" comes from Ronald Fisher, the father of
| frequentist statistics, _defending_ tobacco companies. It 's
| unknown by many people but Fisher was an aggressive shill for
| tobacco in his day and argued that the strong correlation
| between smoking and lung cancer was not adequate statistical
| evidence to show any relationship. Fisher, to this day, being
| one of the most respected minds in statistics held a lot of
| weight with his opinions and is very likely a major reason why
| it took decades for legislation to make any progresses in this
| area.
|
| As a stats person it's one reason I really hate that phrase. Of
| course there are events that have correlation _without_
| causation, however the XKCD hidden text [0] is a much more
| accurate phrasing:
|
| > "Correlation doesn't imply causation, but it does waggle its
| eyebrows suggestively and gesture furtively while mouthing
| 'look over there'."
|
| https://xkcd.com/552/
| Tenoke wrote:
| >What's the financial incentive for a company to actually
| enforce "insider trading" rules to its employees?
|
| E.g. for Coinbase/Binance the financial incentive is that users
| might invest less in their offerings if they consistently do
| worse when participating there compared to initial offerings
| elsewhere or simply due to seeing proof of it. Similar/related
| rules might disincentivize insider trading for the projects
| themselves if insider trading is harmful in the first place
| which I am not sure of. If it is, and the common arguments that
| it leads to less outside investments are true then that should
| at least partially incentivize long-term thinking projects
| against it. Further, Coinbase/Binance have the incentive to
| dissuade projects from taking advantage of the information and
| as far as I know indeed try to though I guess their success is
| mixed.
| usui wrote:
| > E.g. for Coinbase/Binance the financial incentive is that
| users might invest less in their offerings if they
| consistently do worse when participating there compared to
| initial offerings elsewhere or simply due to seeing proof of
| it.
|
| Aside from bad PR spreading like wildfire, won't market
| participants noticing their poorer performance present as a
| negligible quantity and be written off as bad luck because
| the volume accounted for by company employees is too small to
| make a dent? If I understand correctly, for a long time,
| Redditors in WallStreetBets said they were too small to make
| a dent in stocks, but it was only because of the run-off
| effect of being a public forum that GME exploded and garnered
| attention. I figure that a company with employees that can do
| things quietly and in an unmonitored, unregulated fashion
| wouldn't run into people noticing it unless they got stupid
| and grew it out of proportion.
| Tenoke wrote:
| Maybe if the information didn't get out but given that a
| lot of it happens on-chain you get articles like this so
| more of them start suspecting that's the reason for their
| poor returns.
| joshmarinacci wrote:
| I think the significance here isn't the title or the content of
| the article, but that it's on the WSJ website. This will reach
| more people who know little about crypto ins and outs.
| ftyers wrote:
| https://archive.ph/njixG
| [deleted]
| ur-whale wrote:
| https://archive.ph/Ak2Rz
| rdtwo wrote:
| Might? It totally does
| karmakaze wrote:
| What does 'crypto' even mean anymore? I thought it was the "store
| of value' using a decentralized blockchain (ignoring cryptography
| for the moment). At this point we can make up any news story and
| praise or blame crypto.
|
| I'm still trying to decide if the narrow & broad crypto term _is_
| rather than _has_ the problem.
| Spooky23 wrote:
| Lol.
|
| That's like saying Jeffery Dahmer may have had a dietary
| selection problem.
| gruez wrote:
| Obligatory reminder that insider trading laws (at least in the
| US) are about theft of information, not fairness.
|
| >KESTENBAUM: And she says while everybody gets upset at insider
| trading because it gives someone an unfair advantage, that is not
| the legal reason why it gets you into trouble. The argument used
| these days in court for why it's illegal is that insider trading
| amounts to stealing information from a company. It's like theft.
|
| >GOLDSTEIN: And so for that reason, proving that someone traded
| on insider information - that is not enough to convict them. If,
| say, a financial document from some company blows out the window
| and you happen to find it sitting there on the sidewalk, Sarah
| says it's not insider trading for you to use that to make money
| in the stock market because you didn't steal it.
|
| https://www.npr.org/transcripts/596532106
|
| In the case of public corporations, insider information (eg. this
| quarter's earnings) belongs to the company and the company has a
| duty to act in the interests of its shareholders. If you work at
| that company and trade on that information, that's illegal
| because the information doesn't belong to you. However, in other
| markets (eg. commodities or forex), no such "owner" of
| information exists so "insider trading" is effectively legal[1].
| Applying this to the example, it's unclear whether it would count
| as insider trading. I suppose you could argue that people working
| on the project has a duty to protect tokenholders, and therefore
| they should be barred from trading ahead of some announcement,
| but in this case the insiders seem to be insiders on exchanges,
| which hold no such obligations.
|
| [1] "Insider trading" in energy markets is not really a thing,
| because energy markets are largely for producers and users of
| energy to hedge their production and needs, and that production
| and those needs are the sort of "inside information" that would
| move markets. So everyone just kind of gets a free pass to trade
| on inside information.
| https://www.bloomberg.com/opinion/articles/2013-12-19/helico...
| api wrote:
| Water may be wet...
| [deleted]
| SilverBirch wrote:
| Crypto currencies are generally not regulated securities. So
| there's basically no reason that an exchange can't run an
| exchange and then _also_ run a trading team that knows every
| single individual 's position, limit orders, stop losses,
| everything. Oh, and they work for the exchange so they also have
| a latency advantage. I've had conversations with engineers
| working in HFT. Their eyes light up when you talk about crypto
| because you can do every single trick that would get you in
| trouble in real markets.
|
| The fact that the WSJ thinks a trivial amount of insider trading
| is note worthy indicates that they don't have the first clue how
| crypto works. Go and read up on the regulations around trading
| regulated securities, and then realise that that's an instruction
| manual for how to make money trading bitcoin.
| qeternity wrote:
| Seriously, this sort of insider trading is the least of
| concern.
|
| Arthur Hayes was just sentenced. This is old news. Exchanges
| trade against their customers as a matter of business. It is
| core to their revenue.
| influxmoment wrote:
| That was Ripple that was caught trading against their
| customers not Hayes. Ripple paid off regulator so are all
| good now
___________________________________________________________________
(page generated 2022-05-21 23:02 UTC)