I wonder how much money Coinbase employees, friends and family made by insider trading on this announcement. Gotta love unregulated markets!
I actually find it interesting/relieving to have a market where insider trading is legal. If you got your hands on inside information, more power to you!
In the stock market, insider trading being illegal effectively only helps institutions who are already rich, have access to high-frequency trading, effectively do insider trading anyway and get away with it, and puts the average Joes sitting at home with an eTrade account at a distinct disadvantage.
There are things that cryptocurrencies could do to avoid insider trading becoming abused. For example, ensure that larger trades take a long time. Trades of 1000 BTC should require days to execute, while trades of 0.1 BTC should execute in milliseconds. That would help de-throne the hedge funds of the world who have access to more information than average Joe can process, and empower average Joes to leverage everything they know, without messing up the market dynamics for small quantities.
This is incorrect.
"The cat in the hat puts his hat on the blockchain"
BCH up 30%. I wonder how many Coinbase employees bought BCH throughout this past month.
Also. it's easily predictable that introducing a new currency will temporarily affect the other currencies negatively.
Very gray area.
If so, would every bank need to halt trading in a currency before adding it?
Here's a more appropriate analogy. A penny stock with the symbol BCH is lightly traded over the counter by institutional investors via pink sheets. The New York Stock Exchange decides to list the stock for trading, making it easily available to everyone with a TD-Ameritrade/Robinhood/ETrade account but does so with no pre-announcement. Should NYSE prevent their employees from buying the pink sheet over the counter prior to the announcement?
The answer is Yes.
Banks will ban it's employees from buying those pesos because of something called "conflict of interest". It wouldn't matter if the price jumps or not. In fact, a conflict of interest can exist even if there are no improper acts as a result of it.
There are no laws against it for cryptocurrencies, yet. But, if something like this happened, it is unfair to Coinbase's customer.
For instance, employees of the SEC, are not prohibited from trading on insider information (they are to an extent, as in they can't do leveraged short-selling before in investigation is made public, however, for instance, selling out of a position before investigations become public knowledge is obviously common).
https://www.institutionalinvestor.com/article/b15dlrvg8cxkmv...
This is like asking "do high-level (and even medium-level) government employees have to pay taxes ?" (I'm European).
Shoutout to the rich guys that spread the misconception that an information advantage is illegal
Coinbase maintains a strict trading policy and internal guidelines for employees. Coinbase employees have been prohibited from trading in Bitcoin Cash for several weeks.
Now, how would Coinbase know if an employee traded BCH on another exchange?
It's the same reason companies make all their employees go through sexual harassment training. Not because they actually believe such training reduces sexual harassment, but rather because they want to eliminate liability.
Someone who works at Morgan/Goldman/JPM/etc cannot trade on an account at a different brokerage on the announcement. If they do, they will get nailed and most likely go to jail
Coinbase announced they'd support bitcoin cash by the end of the year. It's the last normal business week of the year. Basically anyone who paid attention to their announcements knew it was impending.
[0] https://blog.coinbase.com/update-on-bitcoin-cash-8a67a7e8dbd... [1] https://support.coinbase.com/customer/en/portal/articles/252...
Right now, as explained in op, the exchange is POST only. Nothing is being executed.
Is that not enough announcement?
Coinbase once again exposes itself to extreme public scorn by screwing over its users.
At that time the price was just under $500 so the public had plenty of time to get in. Also note that the price could very well drop as Coinbase customers sell their "free" BCH.
It's the trading support part that was not public, and that part is very important as it significantly widens the population of people who can easily purchase BCH.
Insiders: Bought at $2,500, sold at $3,500, 40% gain in a few hours.
So yeah, insiders could do great on an annualized basis if they could do a bunch of insider trades in a row.
Also there's a big theoretical and serious discussion in financial economics on why insider trading is even net bad. In some ways aren't stock analysts "insiders" with respect to your average SV engineer investing, and isn't an SV engineer who is able to fully understand a balance sheet an "insider" with respect to gambling grandma in Iowa?
Knowledgeable insiders, on the other hand, can execute "hidden" trades that aren't revealed to the public market—and so don't provide information to the market. This distorts the market, moving the value of the instrument away from its true price.
Of course, I wouldn't want to be the guy on the other side of that trade. But then again a casual grandma probably doesn't want to be on the other side of the trade of a multimillion dollar research team either.
Its also unclear what internal firm policies that Coinbase has in place to prevent insider trading, see my reply to hisabness for more on that and an explanation (note: IANAL) of how regulation could be applied.
Let me try to identify the potential victims here: 1. The victim might be "the guy who bought the BCH that the employee was selling", seeing that he could have bought for a cheaper price had the employee not insider traded. 2. The victim(s) might be "all the other investors of BCH", with the thinking that the insider trades devalue BCH (somehow?). 3. the victim(s) might be "the customers of Coinbase", because ... I'm not sure, maybe jealousy?
I'm trying to be reasonable here, but everything I wrote up there seems outlandish or silly. (1) a person who enters into a buy for X agrees to buy for X, and calling somehow who willfully enters into a trade a "victim" is an incorrect use of the English language; in (2), nothing is devalued, the additional buy from the employee should actually increase the coins value, as it represents a higher demand; and (3), 'jealousy', seems like the only thing left. If you're upset that someone at Coinbase managed to earn $$$$ on their trades, but you only earned $$, then we call that emotion "jealousy", and that would be the harm. It would be a harm to your ego, and now you would think that you were a victim. It seems ludicrous to me to support the tearing apart of families (as was suggested earlier) simply because someone is jealous of money.
I can't come up with a reasonable definition of who the victim is, who was harmed, how they were harmed, etc. This isn't proof of the negative, "victimless", and certainly there could be other real victims here (maybe Coinbase itself is the victim? or the US Government? or "the whole of the American public"?); but, it should probably not be assumed to have a victim unless some real, actual harm can be identified. IOW, there is no victim without an identifiable harm.
When it comes to crypto - all you need is an offshore exchange, of which there are plenty.
In all honesty, I don't know what is going on at Coinbase. It looks like a circus and I suspect its days are numbered. It is really depressing actually, not at all what the crypto community needs right now.
You must be joking. Coinbase is probably on track to be the most valuable company YC has ever invested in hands down. Their user growth is insane [0] at 2 million+ per month and a growth rate that appears to be doubling every month. They recently announced they had more users trading on their platform than Charles Schwab. [1] Schwab is a 70 Billion dollar company. I wouldn't be surprised if Coinbase ends up being bigger than YC's next three biggest hits combined.
[0] https://docs.google.com/spreadsheets/d/1NgvD2kFT69mSXuJPzPDu...
[1] https://www.cnbc.com/2017/11/27/bitcoin-exchange-coinbase-ha...
At least before it got hacked.
All it takes is one slip-up.
I hope you're joking.
Don't think anything on that level is being done in the cryptocurrency space.
Obviously a company has to trust its employees to a certain degree but it is certainly easier to conceal cryptocurrency holdings compared to a holdings of a traditional security.
Bitcoin doesn't work as a currency. It's slow, expensive and can never ever scale to handle even the needs of a small town.
> This is an early stage mainstream...
Keep dreaming.
>Keep dreaming. its not functioning as a currency..no cryptocurrency's has a stable intrinsic value because not many people are using it as a currency YET. Everyone is trading cryptocurrencies, and it will continue like that to attract more people. the price will be stable when: 1. people outside the tech real start using it as a currency to buy stuff with (not to cash it) 2. the technology is still so expensive.
its like the internet and hotmail back in 1996..you can argue whether it was a mainstream or an early stage mainstream..it all depends on your "perception"
Lets not even forget that bitcoin is 9 years old. If it was gonna catch on, it already would have. The only way it has "caught on" is a pump & dump get rich quick scheme.
That doesn't matter does it, I remember seeing a TV show interviewing random people on the street 20 years ago asking what they thought about cell-phones. Everyone said they don't see a future for this new gadget, they have a phone at home and can call anyone whenever they want, they don't want to be disturbed at anytime and everywhere. Cell phones were perceived as more of a nuissance than solving a real world problem, the existing infrastructure worked fine for 99% of all users.
https://news.ycombinator.com/item?id=15969102
From the link's tfa
> The company's chief executive intervened after several market watchers posted allegations of illegal activity on social media sites.
From the article on insider trading in The Concise Encyclopedia of Economics:
> Who benefits from regulation of insider trading? One group of beneficiaries is market professionals—broker-dealers, securities analysts, floor traders, arbitrageurs, and institutional investors. The reason is that they are “next in line” for trading profits, as they possess an advantage over public investors in collecting and analyzing information (Haddock and Macey 1987). Regulation also, of course, benefits the regulators—that is, the SEC—by giving that agency greater power, prestige, and budget (Bainbridge 2002). However, the benefits from insider trading laws to small shareholders, the alleged primary beneficiaries, have been extensively debated.
From www.econlib.org/library/Columns/y2015/Hooperharmed.html:
> Insider trading laws are yet another example of government's desire to capture and exercise political, regulatory and legal power, gain huge monetary awards, and garner favorable PR, all for the sake of prosecuting victimless "crimes" and promoting misplaced notions of fairness. Insider trading should be embraced for its beneficial effects on market efficiency and left as a private matter for those companies interested in preventing it. Consequently, the SEC should not have a leading role in insider-trading cases, especially if the purpose is to benefit one group of insiders at the expense of another.
That said, Coinbase did more than insider trading today, they deliberately hid their BCash announcement to perform insider trading. That is straight down fraud to me. They provoked the insider trading situation.
Somehow this turned into "Actually we'll allow full trading. And surprise! We're not even going to tell you about it despite working on it for months, we'll just unleash it on a random Tuesday evening."
Its pretty clear something happened because there was quite a commotion hours before it happened, which means market makers knew it was coming. I have documented message sbefore the coinbase announcement that something weird was going on, and so has the community. Not only that, coinbase gave the appearance of neutrality when it deliberately lied on release date and scope of release. For what purpose but to take advantage of the information arbitrage.
Coinbase sold its users today and as a portion of the community has been vocal about, I recommend leaving coinbase to another exchange that hasn't proven to screw over their users.
Under the 'Misappropriation Theory', insider trading occurs when confidential information is misappropriated for a trading gain. This interpretation of the law has been used by the CFTC in the past [0] to prosecute insider trading cases.
Did Coinbase employees (or their friends/family) commit IT under this definition? I don't know, but if I was the General Counsel of Coinbase I would be hastily typing up a mandatory internal compliance policy for immediate disclosure of cryptocurrency holdings, pre-clearance of all cryptocurrency trades, and a minimum 30-day holding period to discourage day-trading. Such policies are very standard at traditional financial institutions that have access to material non-public information (MNPI) about the financial markets.
[0] - https://www.cov.com/-/media/files/corporate/publications/201...
Prosecutors, judges, attorneys and even jurors aren't stupid. There are remarkably broad statutes out there, fraud or theft or something could reasonably be brought to bear upon you.
It's purely an economic decision to have it be illegal, I can't see anything inherently immoral about it. Some people consider breaking the law to be immoral even when the activity would otherwise be ok however I suspect most people that get angry about insider trading do so because its an activity associated with wealthy wall street types and they're really just angry at wealthy wall street types.
> Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security
Bitcoin Cash is not a stock or a security, so it's questionable whether this concept even applies. But even if you considered it to be a security, then how is Coinbase's decision to list Bitcoin Cash on their exchange somehow in breach of "a fiduciary duty or other reltionship of trust and confidence"?
Perhaps there is some other SEC regulation they might be violating about how the operators of exchanges can trade on their own exchange, such as front running, but it doesn't seem like that would have anything to do with insider trading.
I agree that it's possible that Coinbase's decision to begin trading this asset could influence its value, but that doesn't make the action insider trading. It's fine to take actions while expecting to influence the value of an asset - see for example the massive short position that Ackman took against Herbalife. His public media campaign to discredit the company was expected (calculated) to drive down the value of their stock, but is the fact that he took out short sales in advance of that action "insider trading"? No.