Pump-and-dump schemes have been plaguing cryptocurrency markets for a long time with about $7 million of average monthly trading volume attributed to scams and unfair practices, according to the latest research published by MIT Technology Review.
Jiahua Xu and Benjamin Livshits from Imperial College London analyzed manipulative strategies to see how they work and find a way to spot them at early stages.
What is a pump-and-dump
This form of price manipulations is nothing new in the financial universe. It has been used a lot with securities since early 2000 to boost the price of penny-stocks by spreading rumors and creating FOMO (fear of missing out) sentiments only to "dump" a grossly overvalued asset. The price then collapses leaving investors with heavy losses.
Considering the unregulated nature of the cryptocurrency market and low level of investor protection, regulators globally are worried about the wide-scale usage of pump-and-dump schemes with digital assets.
Back in February, The US Commodity Futures Trading Commission published a warning about this type of financial fraud as applied to virtu...
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