Paper: +4,800 Crypto Pump and Dump Ploys Over 2 Quarters in 2018

Paper: +4,800 Crypto Pump and Dump Ploys Over 2 Quarters in 2018

A group of economists published a paper on December 18th wherein they identified more than 4,800 crypto pump and dump schemes across upwards of 300 cryptocurrencies over a half-year period in 2018. The first-of-its-kind report bolsters the conventional wisdom that the fledging crypteconomy remains rife with manipulation.

Also see: In Shift from White Paper, Substratum to Begin Trading ICO Treasury

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Obscure Coins Most Profitable for Crypto Pump and Dump Campaigns, Say Economists

The paper, titled “The Economics of Cryptocurrency Pump and Dump Schemes,” was written by two Israeli and five American economists and explored the prevalence of crypto pump and dump schemes on popular messenger services Discord and Telegram in 2018.

Over two quarters this year, the authors’ analyses discerned the occurrence of 1,051 pump and dump schemes on Discord and 3,767 such schemes facilitated via Telegram.

The manipulated cryptocurrencies numbered over 300, the researchers found.

A generic market manipulation practice, pump and dump ploys involve the artificial inflation of an asset’s value through coordinated group campaigns in order to conduct selloffs during an acute price spike.

A smartphone and an exchange account are all one needs to participate in a crypto pump. But the authorities are increasingly paying attention.

“This comprehensive data provides the first measure of the scope of pump and dump schemes across cryptocurrencies and suggest that this phenomenon is widespread and often quite profitable,” the authors highlighted in their abstract.

“This should raise concerns among regulators.”

The economists also noted that smaller, lesser known cryptocurrencies were the most profitable coins to pump, insofar as it takes much less trading volume to sharply move such markets in either direction:

“We find that the coin’s rank (market capitalization/volume) is the most important factor in determining the profitability of the pump: pumping obscure coins (with low volume) is much more profitable than pumping the dominant coins in the ecosystem.”

With Growing Awareness, Manipulation a Growing Thread in 2018

Manipulative trading has proven to be headline fodder so far this year in the cryptoverse.

In November, U.S. Securities and Exchange (SEC) Chairman Jay Clayton said manipulation would need to be clamped down upon more resolutely throughout the cryptoeconomy before a crypto ETF could materialize in America.

Also this November came the launch of the Association of Digital Asset Markets (ADAM), a nonprofit group focused, at least in part, in rooting out market manipulation in cryptocurrency markets.

Prior to that, this fall also saw the release of a report from the Office of the New York Attorney General that declared “only a few [exchanges operating in New York] reported having a formal policy in place” to clamp down on market manipulation.

Over the summer, exchange powerhouse Coinbase declared it was building its own market surveillance system in order to be able to track abusive trading patterns on its services.

Reports also broke out in June that the U.S. Commodity Futures Trading Commission (CFTC) was investigating possible manipulative trading on Bitstamp, Coinbase, itBit, and Kraken.

Recent Wash Trading Report Also Raises Red Flags

A December report from the Blockchain Transparency Institute (BTI) found that as much as 80 percent of the volume for the top 25 bitcoin trading pairs was faked via wash trading over a three-month period this year.

Another generic market manipulation practice, wash trading involves the creation of artificial trade volume and false demand through simultaneous buys and sells of an asset.

It’s not the first time wash trading, or even BTI, has been in cryptoeconomy headlines in 2018.

In their latest report, BTI suggested exchanges like HitBTC, Huobi, and OKEx appeared to be some of the space’s leading wash traders.

What’s your take? How should the collective cryptoeconomy in its maturing state go about grappling with market manipulation, e.g. crypto pump and dump ploys? Let us know in the comments section below. 

Images via Pixabay

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