Crypto Pump-and-Dump Turnover Reaches $825M in H1 2018 - Report

Cryptocurrency pump-and-dump schemes generated a turnover of $825 million in the first six months of 2018, according to an investigation by the Wall Street Journal.

Cryptocurrency pump-and-dump groups have generated transactions worth more than $825 million in the first six months of 2018, according to a Wall Street Journal investigation, which managed to identify 175 such schemes, featuring 121 different altcoins. The revelations are hardly shocking to crypto traders.

What are pump-and-dump groups?

In case you have never heard of pump-and-dump groups, the concept is very simple. Traders create chatrooms in messaging apps, like Telegram or Discord, where information is shared. All rooms have an existing hierarchy, with the owners deciding which coin to buy into and at which exchange. Group members then act at a specified time, causing a relatively small rally, known as the “pre-pump”. Senior “officials” then use various means of communicating the action to the general public, which will supposedly enter the market, creating a more significant move to the upside. Chat members will later sell their coins to the newcomers at pumped prices potentially making a decent profit.

In case you want to get a closer look without going through the hassle of setting-up various accounts, be sure to check our own investigation on pump-and-dump groups. In it we visit three specific chatrooms and provide detailed analysis on the events which occurred.

New revelations?

The WSJ report unveils information which is generally known by crypto enthusiasts, but revealing it to the mainstream could keep inexperienced traders from falling into such traps. 

Some of the highlights include:

  • Groups target mostly coins with low market capitalization, so the manipulation can be performed effectively.
  • Some of the chatrooms require monthly subscription fees, allegedly ranging from $50 to $250, but the most popular ones are free.
  • While exchanges are aware of this behavior, they take no action for preventing it. Even the teams behind relatively unpopular altcoins know their token is used in this fashion, but can’t do much about it.

Pump-and-dump schemes are not always profitable. Similar practices are illegal in regulated financial markets (and obviously unethical), but also hard to participate in. The price action often occurs so quickly within a few seconds, and might cause substantial losses.