Cryptocurrency Pump-and-Dump Schemes
Read the paperopens papers.ssrn.com in a new tab
What they found
The authors collected hundreds of pump-and-dump schemes organized in Telegram groups in 2018, where organizers announce a coin at a fixed time and members rush to buy. Prices rose sharply within seconds of the announcement and typically collapsed within minutes; the organizers and the fastest participants profited while later buyers lost. The schemes targeted small, illiquid coins and generated abnormal volume that was visible in advance, and the price run-up started minutes before the public announcement, suggesting insiders traded ahead of the group.
What you can use
- Coordinated pumps in small coins are a zero-sum game where the organizers and insiders win and the crowd loses within minutes.
- Unusual volume in an illiquid coin before any news is a red flag for a pump, not a signal of informed buying.
- Being fast is not enough: the insiders are already positioned before the announcement.
Caveats
Working paper; data comes from a specific set of Telegram groups in 2018. Exchanges have since delisted many targeted coins.
Tags: crypto, pump-and-dump, manipulation, telegram
Summaries are our own reading of the paper, not the authors' words. Educational only, not advice. Discuss it in Book Club.