Pump and dump schemes are becoming increasingly common in the cryptocurrency markets. Cybersecurity experts are now learning to predict them in advance.
Trading in the cryptocurrency market has been like a roller coaster ride over the past few years.
The high volatility of crypto assets, as well as the anonymity they offer, has attracted many scammers and scammers into the crypto space. The history of cryptocurrency is replete with thefts, Ponzi schemes and other scams. But in recent months, one type of scam has come to the fore: the Pump and Dump scheme.
Researchers at Imperial College London have studied pump and dump schemes in cryptocurrency markets and are now publishing the first detailed report on how they work. Researchers have even developed an algorithm that can predict the next upcoming Pump and Dump, offering a promising way to prevent them.
Pump and Dump schemes are a well-known trick in traditional financial markets that begin with picking a dubious asset and quietly hoarding it. Active buying of a coin by a group of people in a matter of seconds can pump up its price by 300-500 percent and allow naive novice traders to dump the entire supply at an inflated price.
After studying 236 events associated with Pump and Dump between July 21 and November 18, they made sure that all of them were preceded by an uncharacteristic buying of the target coin.
Researchers note that on average, two similar scams occur every day, and each month they generate about $7 million in trading volume in the cryptocurrency market.
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