Study shows cryptocurrency "trading groups" earned $825M in 2018 through P&Ds

07 Aug, 2018
by Matthew Kim
Study shows cryptocurrency trading groups earned $825M in 2018 through P&Ds

A study by the Wall Street Journal (WSJ) revealed that “trading groups” scammed the market through pump and dump (P&D) schemes to secure an estimated $825 million in the first half of 2018.

Pump and dump is an age-old form of securities fraud of manipulating the price of stock through organized action. Previously, fraudsters artificially inflated the prices of stocks to create a false sense of market positivity before dumping their shares at a much higher price. Governments attempted to regulate these schemes by putting limitations on micro-cap stocks, or “penny stocks”, vulnerable to price manipulation.

However, with the rise of cryptocurrency, a largely unregulated market with hundreds of low market cap coins emerged to be a prime target for P&Ds and the cryptocurrency trading groups have taken advantage. Using instant messaging tools such as Telegram and Discord, trading groups coordinated nefarious P&Ds on unsuspecting traders and investors.

WSJ claims that these groups are accruing millions of dollars at the expense of others. In one example, Cloakcoin, a lesser known altcoin trading on Binance, had a dramatic spike in price and trading volume on July 1st shortly after a signal in the Big Pump Signal trading group. Despite the stagnant movement of other coins on Binance on that day, Cloakcoin massively fluctuated, and WSJ points to Big Pump Signal as the reason.

This report by the WSJ uncovers yet another reason why the cryptocurrency market must be quickly and sensibly regulated. The governments must find a way to protect the investors and traders from P&Ds and other problematic risks in the new market to foster an environment for the new technology to grow. The cryptocurrency market is a promising market full of potential, but these are just some of the growing pains that it will need to experience in its development.


Were you ever in a crypto trading group?

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