Uncovering Insider Trading: Why is it illegal?
Insider trading is like having cheat codes for the stock market game. It is the act of purchasing or selling assets by utilizing privileged information that is not publicly available. There is a possibility that it could influence the token’s value in the future.
Insider trading and insiders are now common terms used in cryptocurrencies, adopted from the stock market. Insiders are people or entities with privileged access to confidential information about assets. This gives them exclusive insights into market conditions unavailable to the public.
You may have the sharp analytical skills to make educated guesses about an asset's future price, but without insider information, it's just speculation. True confidence comes from having access to confidential information within the company. When this information is used to trade assets, it's considered insider trading – a risky and illegal practice that can have serious consequences.
Insider information is any news that impacts the price of an asset. For instance, the listing or delisting of a token on a major cryptocurrency exchange, the purchase of an NFT that will serve as a criterion for receiving an airdrop, a company's acquisition of another project whose token is already traded, partnerships between projects, etc.
Why insider trading is illegal: uncovering the facts
Insider trading results in an unfair advantage for one market participant over others. This allows them to manipulate a company's share price to their advantage.
In the cryptocurrency market, there are many people working. To ensure information does not leak outside the company, employees must sign a non-disclosure agreement that protects confidential information. However, insider trading can also be carried out by company employees, so this does not exempt them from responsibility.
Insider trading is viewed as a serious offense in the world of cryptocurrency and can lead to severe consequences, including hefty fines and imprisonment. The possible consequences of such activity are so severe that even the mere idea may prompt hesitation.
Insider trading has a negative impact on any market for several reasons:
1. It allows malicious players to manipulate the market.
2. While insiders may profit from this, their actions can lead to significant losses for other traders.
2. Such trading damages the reputation of companies whose employees engage in insider trading.
3. It also reduces trust in the market and creates unequal trading conditions. In the long run, this may affect the entire sector's growth rates.
4. Insider trading gives regulators a stronger justification to increase market scrutiny and regulation.
The most recent incident of potential insider trading occurred in the winter, on February 17th to be exact. It was discovered by the popular analytical service Lookonchain. On that day, the Binance exchange announced the GNS token listing. Several hours before the listing, a trader began accumulating GNS positions, only to sell them off for a profit of $100,000 less than an hour after the listing.
In conclusion
Tracking insider trading on the cryptocurrency market is quite difficult, and proving it is even more challenging. At present, it is unknown how widespread this practice is. However, we know for sure that it has a negative impact on the cryptocurrency market as a whole.
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