Researchers at Imperial College London claim to have developed a model for a crypto “pump-and-dump” scam, making it possible to proactively detect them.
Jiahua Xu and Benjamin Livshits at Imperial College London were the prime researchers in this study. They utilized artificial intelligence (AI) and machine learning to analyze hundreds of crypto pump-and-dump schemes to figure out a way to spot them before they occur.
Pump and Dump schemes are an age-old devious investing ploy wherein investors purchase an asset in large swaths, pushing its price up, a “pump,” and then sell-off or “dump” the overpriced assets causing a massive fall in prices and losses to the rest of the market.
While cryptocurrency markets are currently in a rut, with some coins reaching new lows in the month of November, daily trade volume is currently $14.2 billion, according to CoinMarketCap. The pump and dump volume cited in the study only accounts for 0.049 percent of total 24-hour trade volume.
The prime focus of the study was on the coin, BVB, created by the supporters of the German Bundesliga football club Borussia Dortmund which operated this “Pump and Dump” on November 14. Xu and Livshits tracked the announcements on Telegram, McAfee Pump signals and the changes in price and volume of the coin.
Per the researchers, these scams have grown into a major nuisance. The researchers believe there are – on average – two pump-and-dump scams a day, accounting for $7 million in trading volume per month. There are more than 100 Telegram channels currently dedicated to the pumping-and-dumping of lesser coins.