In today's cryptocurrency market, the growth rate of ERC-20 tokens is remarkable. As more and more projects are listed on centralized exchanges (CEX), investors' attention is gradually turning to these emerging digital assets. However, it is accompanied by a problem that cannot be ignored - insider trading. According to the latest data, 56% of ERC-20 tokens are suspected of insider trading when they are listed on CEX. This phenomenon has triggered widespread discussion, and many investors have said that they are like "leeks" in this market and may be harvested at any time. This article will explore in detail the causes, impacts and possible future developments of this phenomenon.

First of all, the concept of insider trading is not unfamiliar. It refers to some insiders using non-public information they have to trade before the disclosure of undisclosed information, thereby obtaining improper benefits. In the cryptocurrency market, due to the lack of effective supervision and transparency, insider trading has become more serious. Especially in the process of ERC-20 tokens being launched, this phenomenon is common. For example, before some projects are launched, the project party or its related personnel obtain tokens in advance through private placement or other means, and quickly sell them at the moment of listing, resulting in losses for ordinary investors.

Further analysis shows that the main reasons for the high incidence of insider trading when ERC-20 tokens are listed on CEX are as follows. First, information asymmetry is the root cause of insider trading. Project parties often have a lot of market information before going online, including token pricing, listing time, exchange liquidity, etc. The mastery of this information enables project parties to make early arrangements and obtain huge profits before the market reacts. Secondly, the irrationality and speculation of the market also contribute to the breeding of insider trading. When facing newly launched tokens, many investors often have the mentality of "buy high and not buy low", blindly follow the trend, and cause prices to fluctuate violently in a short period of time. This fluctuation provides an opportunity for insider trading.

To better understand this phenomenon, we can look at specific cases. On the eve of the launch of a well-known ERC-20 token, the project party created strong market expectations through social media and community publicity. On the day of the launch, investors flocked in and the price soared. However, at the moment when the price reached its peak, the insiders of the project party chose to sell the tokens in their hands, causing the price to fall rapidly. This process has caused a large number of ordinary investors to be deeply involved and suffer heavy losses, while the project party has obtained considerable profits in a short period of time. This phenomenon of "harvesting leeks" is not uncommon in the industry, and many investors are angry and helpless about it.

In addition to information asymmetry and market irrationality, insufficient supervision is also an important reason for the frequent occurrence of insider trading. Compared with traditional financial markets, the regulation of the cryptocurrency market is relatively lagging, and many countries have not yet established a complete legal framework to constrain trading behavior. This has led to repeated success of insider trading, and ordinary investors often have no way to protect their rights when facing risks. What's more, some exchanges turn a blind eye to insider trading and even secretly collude with the project party, further exacerbating the injustice of the market.

In order to cope with this phenomenon, investors need to enhance their risk awareness. When choosing an investment project, in addition to paying attention to the technology and team background of the token itself, you should also pay attention to the transparency and supervision of the project. Investors can try to obtain comprehensive information by consulting the project's white paper, community dynamics, and exchange announcements. In addition, participating in community discussions and understanding the views of other investors can also help you make more rational decisions.

At the same time, the industry should also strengthen self-discipline and promote the establishment of a more complete regulatory mechanism. As an important participant in the market, exchanges should conduct strict audits on the projects launched to ensure their compliance. In addition, industry associations can promote the transparency of insider trading and enhance the overall integrity of the market by formulating relevant standards and norms. In this way, a safer trading environment can be created for investors and the losses caused by insider trading can be reduced.

In the future, with the continuous development of the market and the gradual improvement of supervision, the phenomenon of insider trading may be alleviated. However, investors still need to remain vigilant in this process, always pay attention to market changes and their own risk management. Only through continuous learning and adaptation can we be invincible in this ever-changing market.

In short, the phenomenon of insider trading when ERC-20 tokens were launched on CEX not only affected the interests of investors, but also damaged the healthy development of the entire market. By enhancing their own risk awareness and promoting industry self-discipline, investors and industry participants can work together to create a more fair and transparent environment for the future of the cryptocurrency market. I hope that in the near future, we will be able to see a healthier cryptocurrency ecosystem, so that every investor can obtain the due returns in this market, and no longer suffer the fate of being a "leek".

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

Coin Circle (120Btc.com) News: Insider trading has always been criticized by investors. The advantage of information difference not only violates fair competition in the market, but is also likely to cause irreparable damage to the trading order. This situation also occurs frequently in the field of cryptocurrency. For example, in May this year, several executives of Coinbase were prosecuted for suspected insider trading for profit.

What is even more surprising is that according to a report released by the research institution Solidus
Labs yesterday (28), it was further pointed out that more than half of the ERC-20 tokens were listed on cryptocurrency exchanges.

More than half of the newly listed ERC-20 tokens have insider trading

Solidus Labs focused on studying data from January 2021 and found that 56% of ERC-20 tokens were suspected of insider trading when they were first listed on mainstream cryptocurrency exchanges.

The report found clues from the records of these tokens on decentralized exchanges (DEX). After sorting, there were 411 related transaction records involving insiders and more than 100 people involved in the case.

Chen
Arad, co-founder of Solidus Labs, said in an interview that the emergence of this situation also reflects the inefficiency of the cryptocurrency market: if more than half of all tokens listed on the exchange cannot be purchased through trust. Then this is a less efficient market. And cryptocurrencies cannot solve this problem before they are promoted to a new level.

The insider trading problem stems from the lack of supervision in the industry

Although the profit-making methods used by insiders are very simple, they are quite profitable. They usually secretly buy the token a few hours or days before the token is listed on a centralized exchange, and then quickly sell it on a decentralized exchange after the price rises.

And some owners of suspicious wallets even use mixers such as Tornado Cash to transfer funds.

The report also analyzes the identities of these speculators. In addition to being employees of centralized exchanges, token issuers, and market makers, insider traders may also be venture capital companies further upstream.

Arad believes that the biggest reason for this chaos is that the crypto market industry is not mature and there is no agency that can conduct cross-market supervision and law enforcement in a timely manner. If industry participants can pay attention to this issue, the current chaos may be improved soon.