Insider information

What is insider information? From the name, you can understand that this is information that is not available to a wide range of people, but if it leaks, then it can greatly influence the market. But whether this is really the case, we will understand in this article.

Definition

Insider information is classified information, the confidentiality of which is not disclosed. If someone can somehow master it, then he will be able to easily control and have an advantage over the rest of the residents of the market.

Who can be the owner of insider information:

• Management and superiors of companies. Without these people, no actions will be taken regarding the further development of the organization.
• The government of the countries and their relatives.
• Employees of the organizations. At the time when the company decides to develop a new product, employees of the organization will sell it. Consequently, they receive company confidential information.
• A bank that lends to companies. To obtain a loan from a bank, a company must give a full account of what it does.
• Third parties. Information is often leaked. This is due to hacker attacks, human error, or worker negligence.

Inside information contains commercial, service or bank secrets:

• Financial statements of the organization. Profitability and net profit if not disclosed by the managers themselves.
• Information about M&A companies.
• Information about the change of managers.
• Information about the release of a new product.

All these facts are considered insider, until the organization officially reveals them.

Who owns the insider information?

Inside information is not available to anyone who wants to know about it. Typically, its owners are high-ranking individuals who have power and money at their disposal. Or they can be the first faces of the company, as close as possible to all important processes of the company. Even if an ordinary staff member were to gain access to confidential information, in most cases he would simply not be able to understand how he would deal with it properly. And most importantly, inside information is available on the Internet with a 0% probability, in all other cases it’s cheating because:

1. The cost of insider information can amount to millions of dollars, so you can’t get it for $100 from some “unknown person who knows the subject”.
2. Insider information is not submitted in the format «Tomorrow will be a merger of Samsung and Apple, buy shares». Often, the amount of information, or sufficiently diverse, that not everyone can understand and correctly interpret, or is a small piece of other, more extensive information. Putting a single piece together is impossible.
3. The disclosure of insider information is a criminal offence punishable by imprisonment and heavy fines. So someone who actually has important information will not go online.

Myths about insider information

There are theories concerning insider information, we will analyze in more detail.

Most of the leaks are not accidental

According to some, confidential information is leaked on purpose, despite possible problems with the law. Yes, it does happen, but it’s often because of the human factor. A person could simply make a mistake and send information not where they wanted to be. Godai Group’s research company conducted an experiment: 30 fake e-mails were registered, with one misprint in the address, in contrast to the original e-mails of companies that were taken from the Fortune 500 list. In the half-year of existence of counterfeit mailboxes, 120,000 letters have arrived on them, of which 1% contain confidential information. And this is just one example of human inattention, and there are many.

The information is disclosed by employees

People who «hunt» for confidential information do not very much fear problems with the law. Therefore industrial espionage takes place. The wiretapping of the workplace and the mobile phone, the tracking of transactions on the computer, the attempts to hack into the company’s cloud vaults – these methods can steal the right information, especially when the case promises to be profitable. Also, an employee of the company can be invited to an interview and asked about interesting moments. Obviously, no one will tell you the classified information, but the general information about the company, which is hidden to the public, will be found out.

Control over employees eliminates the leakage of information

This could be true if the employee monitoring systems were configured and designed correctly. These systems bypass and still leak information. In addition, not everyone likes total control over their person in the workplace. If the company’s management keeps silent about the surveillance of its employees, and it is revealed, then their performance will clearly decrease. Of course, there are companies where the systems work correctly and do not allow you to doubt the integrity of employees, but often everything happens the other way around, which is why there are disagreements within organizations.

Insider Information in the Crypto Industry

80% of information leaks occur on the stock market. As for the crypto industry, project tokens can be compared to shares, since the token is issued by an organization or a group of persons whose activities directly affect the value of a digital asset. Examples of insider information that can affect the value of a token or cryptocurrency:

1. Important partnership. If a little-known project is partnered with, say, Binance, it will clearly affect the value of the project’s assets. On July 20, 2020, the collaboration between the MasterCard payment system and Wirex cryptocurrency startup was announced. During the hour, the cost of the WXT token increased from $0.0098 to $0.0150. If anyone knew about the collaboration before, he was able to make a pretty good profit.
2. The project could initially be launched for the purpose of a pump or dump. The founders, after the launch, having internal tokens and funds at their disposal, can easily manipulate the price.
3. Collusion of major market players, for the purpose of pumping or dumping a certain coin. The project may not be new, but simply with a small capitalization and audience, but it may well deserve attention from major market participants.
4. Negative news within the company. A change of management, the dismissal of key figures, a negligent attitude to work – in fact, everything is the same as in companies outside the cryptocurrency industry.
5. Scam project. The most common practice in the cryptocurrency market, at least before it was such. The token holders of the project were figureheads, after receiving the assets, it merged with a terrible force. The attackers received fiat, and the new token holders were left with nothing.

Conclusion

Cases of information leaks will always exist, putting market participants in an unequal position. But even though insider information harms market participants, there are those who consider it absolutely normal for individuals to have confidential information. In their opinion, these people spend a lot of time and effort, possibly even money, to get this information, so they have the right to dispose of it as they see fit. I think it is not necessary to explain that such people are usually condemned by the audience they are inside. It is better not to try to find insider information, but to trade on the crypto market, which shows impressive profitability. RevenueBot will help you with this.

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