A recent ‘study‘ has found that pump and dump schemes account for nearly $7 Mln value of commercialism volume per month, as per a report published by MIT Technology Review. The analysis was performed by researchers Jiahua Xu and Benjamin Livshits at Imperial College in London.
A pump and dump scheme can be well visualised as a type of securities fraud that has additionally become common within the cryptocurrency ecosystem. The organizers of the scheme opt for a coin, boost its worth and then “dump” sell their overvalued crypto currency, that additionally results in the worth falls and losses among several other investors.
While cryptocurrency markets are presently in a rut, with some coins reaching new lows, as observed within the month of Nov this year, daily trade volume is presently $14.2 Bln, in line with CoinChangelly. The pump and dump volume cited within the study solely accounts for 0.049% of total 24 hr. trade volumes.
In line with the analysis, the analysts reportedly targeted on a pump and dump scam with a coin known as BVB, that happened on 14th Nov., 2018. They collected details by following announcements on many Telegram Channels, along with Official McAfee Pump Signals, and recorded the worth changes and commercialism volumes of the chosen coin.
McAfee Pump Signals reportedly disclosed BVB, that had been dormant for over a year by that point, with very little commercialism activity and a price of around $0.001322 USD.
The first purchase order was placed and completed within one second once after the primary announcement, in line with Xu and Livshits. The coin’s worth reportedly surged to its peak just after 18 seconds, hitting a $0.0043438 USD.
It took the participants about 3.5 minutes after the beginning of the pump and dump” to acquire their profits, after which “the coin worth had fell below its opening worth,” the researchers added. The analysis disclosed that people who joined the activity just more than 18 seconds after its starting could hardly create any profits
Additionally, Xu and Livshits investigated 236 alternative pump and dump scams that took place between 21st July and 18th Nov, stating that “many of them were preceded by uncommon purchasing activity within the targeted currency.” Explaining further, the researchers stated that:
“The study reveals that pump and dump organizers could simply use their insider info to acquire further gain at the sacrifice of fellow pumpers.”
The researchers suggests that it’s though possible to identify targeted currencies before they’re disclosed by searching for surprising trades in shadowy coins. Xu and Livshits appealed to the historical data from the known pump and dump schemes to coach a machine learning algorithmic rule to trace telltale signs that a ‘scam‘ can shortly occur.
Earlier in Aug, the Wall Street Journal revealed via a study that cryptocurrency worth manipulation was mostly conducted by organized “trading groups” employing services like Telegram. The WSJ urged that coordinated “pump and dump” schemes had seen traders inflate and crash the worth of several crypto-currencies within this year.