4818 Pump and Dump Schemes Involving Bitcoin (BTC), and 300 Cryptos Identified By a Team of Economists

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On the 18th of December, a team of economists from America and Israel released a research paper examining pump and dump schemes in the crypto-verse that have flourished on the two platforms of Telegram and Discord. The 19 page report acknowledges that there has been an increased interest in cryptocurrencies in the past few years that has been accompanied by a proliferation of fraud.

4818 Pump and Dump Schemes Involving Bitcoin (BTC), and 300 Cryptos Identified By a Team of EconomistsThe research paper goes on to explain:

While the fundamentals of the ruse have not changed in the last century, the recent explosion of nearly 2,000 cryptocurrencies in a largely unregulated environment has greatly expanded the scope for abuse.

The paper first quantifies the scope of cryptocurrency pump and dump on Discord and Telegram, two widely popular group messaging platforms with 130 million users and 200 million users respectively.

Both platforms can handle large groups with thousands of users, and they are the most popular outlets for pump and dump schemes involving cryptocurrencies.

We identified 3,767 different pump signals advertised on Telegram and another 1,051 different pump signals advertised on Discord during a six-month period in 2018. The schemes promoted more than 300 cryptocurrencies.

Bitcoin Not Immune to Pump and Dump Schemes

The team managed to match the pump and dump information on Discord and Telegram to actual trading data. They also looked at the accuracy and success of the pump and dump schemes and found that there was evidence that such activities affected the price of Bitcoin.

They paper went on to explain how BTC was affected by the pump and dump activities.

Most of the cryptocurrencies cannot be directly traded with USD, but they can be traded with bitcoin. Hence, we use coin prices in bitcoin. Because of this, we cannot include the pumps using bitcoin itself.

There were 6 pumps of bitcoin on Discord and 76 pumps of bitcoin on Telegram. While these pumps account for only 1.7% of all pumps, it is important to note that bitcoin is not immune from the pump and dump phenomenon.

More information on the research paper and the methodologies used can be found here.

About the Economists

The team that carried out the research and wrote the paper is as follows:

  • JT Hamrick – University of Tulsa – Tandy School of Computer Science
  • Farhang Rouhi – University of New Mexico – Computer Science Department
  • Arghya Mukherjee – University of Tulsa – Tandy School of Computer Science
  • Amir Feder – Technion-Israel Institute of Technology
  • Neil Gandal – Berglas School of Economics, Tel Aviv University; Centre for Economic Policy Research (CEPR)
  • Tyler Moore – University of Tulsa – Tandy School of Computer Science
  • Marie Vasek – University of New Mexico – Computer Science Department

What are your thoughts on pump and dump schemes rampant in the crypto-verse? Please let us know in the comment section below.

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