Guys, it appears as though prominent cryptocurrency exchange Coinbase is under a bit of scrutiny this week following allegations of insider trading. These allegations surfaced after the owner of an ETH wallet spent $400,000 on a number of tokens mere hours before Coinbase published a blog identifying the exact same list as tokens under its consideration for launch on its exchange in the coming months. The tokens in question gained up to 42% in value after the publication. Does this means that the allegations had merit? Was this a case of insider trading or was it just a lucky coincidence? Let's discuss.
Coinbase aims for Transparency
On April 11th, Coinbase published a list of 45 ERC20 tokens and 5 tokens on the SOL network under its consideration for listing between April 1st and June 30th, 2022. On the face of it, this measure served to demonstrate the exchange's stated commitment to increased transparency, and, as has been a relative norm with listings on the exchange, the "Coinbase Effect" kicked in and prices soared.
Traders Respond with Allegations of Insider Trading
Shortly after Coinbase's post, influential crypto analyst and podcaster, Jordan Fish, also known as CryptoCobain or simply Cobie, made the following revelation:
And everyone was like:
This observation sparked a heated conversation on the Twitter and Reddit media platforms with some users pointing to the fact that this is not the first time the exchange has faced allegations like this.
One Reddit user, Humble Farmer (u/dragondude4), also called into question the credibility of listings on the exchange.
"Earlier today Coinbase made a “transparency post” naming about 50 assets that they are planning to list on their exchange, he stated. "Most of them are illiquid shitcoins that no one can figure out why they are even listing in the first place."
His post compiled a list of allegations suggesting instances of insider trading in the past.
Both on Twitter and Reddit, users responded with allegations about other exchanges while a few questioned the moral outrage of traders who would do the same thing if given the chance.
To date, the owner of the wallet has not been identified and Coinbase is yet to respond to media requests for information.
What Happens Next?
Well guys, given that Coinbase, in publishing this list of tokens, has reiterated its commitment to transparency, then I think it's only fair to expect the exchange to follow through on that commitment and demonstrate transparency by publicly addressing this issue and laying concerns about its process to rest formally.
At the moment, while I cannot say for certainty that this is a case of insider trader, I can say that it doesn't look good. Nevertheless, I hate to make sweeping statements or allegations without complete information, and so, I'm looking forward to some statement from the exchange on the matter.
That said, guys, should this be a case of someone getting a tip off and using that information for personal gain, then I do think that investors and traders have every right to be outraged. One must be able to trust the institution managing their funds, and while cryptocurrency transactions are largely unregulated, the absence of regulations does not remove the responsibility of institutions to conduct transactions in a manner that is credible and above reproach.
But let me get off my soap box. Tell me, friends, do you think that employees at cryptocurrency exchanges practice insider trading? And going forward, as the industry continues to develop and as conversations surrounding regulations also continue, how do you think issues like this could and should be addressed to ensure investor confidence in the future?
One thing though, you have to give it to the investors and traders in this industry who are extremely vigilant and have managed to shine a light on questionable practices in the space.
Well, guys, that's it for me today. I'm off again in search of another story which, of course, I'd bring to you. In the meantime, please remember to be safe.