7 ms·

How traders 'pump and dump' cryptocurrencies

174 points by bradvl 9y ago

Itsdijital 9y ago
How traders pump and dump sub 50 btc volume coins is a more accurate title. Manipulating a coin with 1k+ volume is significantly harder.
- godelski 9y ago
  I've been hearing talk about 1k people own >40% of BTC[1]. I think having that kind of market share gives you that kind of power, especially if you coordinate your moves (like the article suggests). This article more seems like spammers. Same kind of thing that the stock spammers did with emails. There's a nice DefCon video about this [2]. Basically some people have a lot of the stock (or coin), get people to buy, and dump on them. I think the evidence that people have been doing this with the smaller stock exchanges show that it can be done with BTC. I think if you watch BTCs price long enough, you can even see these patterns. [1] https://www.bloomberg.com/news/articles/2017-12-08/the-bitcoin-whales-1-000-people-who-own-40-percent-of-the-market https://www.bloomberg.com/news/articles/2017-12-08/the-bitco... [2] https://www.youtube.com/watch?v=ytDamqTjPwg https://www.youtube.com/watch?v=ytDamqTjPwg
  - VMG 9y ago
    > I've been hearing talk about 1k people own >40% of BTC[1]. That seems dubious. These numbers usually don't account for custodial wallets e.g. exchanges
    - atmosx 9y ago
      "The Bitcoin system is the best known and most widely used alternative payment scheme, but so far it was very difficult to get accurate information about how it is used in practice. In this paper we describe a large number of statistical properties of the Bitcoin transaction graph, which contains all the transactions which were carried out by all the users until May 13th 2012. We discovered that most of the minted bitcoins remain dormant in addresses which had never participated in any outgoing transactions. We found out that there is a huge number of tiny transactions which move only a small fraction of a single bit- coin, but there are also hundreds of transactions which move more than 50,000 bitcoins. We analyzed all these large transactions by following in detail the way these sums were accumulated and the way they were dispersed, and realized that almost all these large transactions were descendants of a single transaction which was carried out in November 2010. Finally, we noted that the subgraph which contains these large transactions along with their neighborhood has many strange looking structures which could be an attempt to conceal the existence and relationship between these transactions, but such an attempt can be foiled by following the money trail in a sufficiently persistent way." - Dorit Ron and Adi Shamir ref: https://eprint.iacr.org/2012/584.pdf https://eprint.iacr.org/2012/584.pdf
    - quickthrower2 9y ago
      Yes, plus how to tell the difference between hodlers and lost keys?
Timbaker 9y ago
These days, iN KOREA, it is crazy!! Several days, it shows going down tread, but in las weekend it goes up and upper! you guys, I want to ask you, how long does this situation go?
electic 9y ago
I am on Telegram and none of these channels really have any bearing on pumping a coin. There might be some movement on smaller coins but these channels rarely play a major part. Typically what happens, is a whale starts buying a particular currency and magically you start to see news articles appear on major and smaller niche crypto blogs. Then the reddit posts start appearing causing a even more hurried frenzy to buy the coin. It is very similar to how traditional stocks are pumped. On a side note, I am noticing a trend from Forbes, Business Insider, and CBS News that are very hostile to the crypto space. They will literally grasp at any resemblance of shadyness to write a negative article.
- autokad 9y ago
  feels like a fear and smear campaign to allow the government sweeping authorities and regulations "for everyone's own good" that probably offer little help to the problem the fear and smear campaign was calling out.
nkrisc 9y ago
The current link anchors to the bottom of the page.
- sctb 9y ago
  Thanks, we've removed that from the link.
cyphunk 9y ago
you had me at... "Russian messaging app Telegram is heavily encrypted and,..." enough of the mccarthyism. anyway, time to log off of my freedom infused american hacker news app and go work for a bit in my almost fascist italian code editor on my communist chinese computer
- skinnymuch 9y ago
  It's not even really Russian. It's based in Germany. Pretty sure the founder and his brother of VK fame haven't been back to Russia since Telegram was created. Either are dual citizens or only have non-Russian passports now too.
- deleted 9y ago
  [deleted]
vim_wannabe 9y ago
Sounds more like whale/s telling people to raise the price of a coin then dumping on them, rather than some kind of a 'collaborative' pump. The article is talking about minutes after all so there's likely no outside buyers fast enough to react. Essentially most 'members of the community' will lose, but some lucky ones will be fast enough to dump before the whale for at least some cash.
- ceejayoz 9y ago
  You're probably right - the folks in this group think they're running the scam, but they're mostly (unsympathetic) victims of it. Safe bet the admin's purchasing the coin before sending the "pump FooCoin!" message, and dumping it before sending the "make it crash now" one.
- KVFinn 9y ago
  >The article is talking about minutes after all so there's likely no outside buyers fast enough to react. The article doesn't talk about it, but there are campaigns organized over days and weeks to talk up a coin. It's not all about minute timescales.
  - mancerayder 9y ago
    Do you have evidence of these? Don't get me wrong, I believe you, but convincing evidence, even anecdotal, would be useful. Of the big coins, not the hundreds of random ones with "To The Moon" Reddit comments.
    - KVFinn 9y ago
      >Of the big coins, not the hundreds of random ones with "To The Moon" Reddit comments. In terms of personal experience, I've not seen anything as explicit as this article. And nothing with a giant market cap coin. More like a gray area between pump and dump and a bunch of over enthusiastic marketers. Like I'll be reading a forum and notice a ton of people hyping up a small market cap coin. Check their post histories and they are generally new or they've only talked about the coin. Eventually find the slack/discord for the coin, people are posting links to forums/threads/mentions of the coin in the discord, and people are organizing shifts to give support. The comments are all purportedly coming from a genuine place (and to an extend they may be) but they were posted as if they were just random people stumbling across this discussion -- not an organized group explicitly trying to spread the good word.
deleted 9y ago
[deleted]
blcArmadillo 9y ago
Is coordinated buying really considered pumping? Don't you also have to distribute misleading information?
jeremyt 9y ago
This article is complete bullshit. I'm a member of this group, only because I was added without my consent, which is probably the case for most of the users in the group. Just for giggles, I watched them do a pump and dump one time, and they basically sold the pump hard, managed to get about 10 Bitcoin in some tiny market cap coin, and then one guy sold all the way back down and left the "members" of the group holding the bag. This group is a scam, but not in the way that this article says. Also, telegram isn't encrypted as far as I know.
- jsmthrowaway 9y ago
  > Also, telegram isn't encrypted as far as I know. Sure it is. There are (optional) E2E one-on-one secret chats. Doing E2E for a group is obviously a bit harder, as that's broadcast or multicast encryption -- think the DirecTV problem -- but the protocol itself is encrypted nonetheless. https://en.wikipedia.org/wiki/Telegram_(messaging_service)#Encryption_scheme https://en.wikipedia.org/wiki/Telegram_(messaging_service)#E...
  - fwn 9y ago
    Optional end to end encryption with an additionally crippled UX just means 1. no used end to end encryption in practice and 2. a worse reputation for e2e as a whole. Telegram has it as much as Facebook Messenger has it. It's a fig leaf.
- jcoffland 9y ago
  Telegram's key feature is encryption. https://telegram.org https://telegram.org
  - neuralzen 9y ago
    Only on phones, there is no option to encrypt on desktop.
    - jcoffland 9y ago
      According to their website all data is encrypted. From what I understand it's transparent and does not require enabling via an option.
cowpig 9y ago
I have a feeling these businessinsider articles are actually coming from the pump and dump groups' press kits.
m3kw9 9y ago
Happening every day at the penny stock stalls in small doses, but in crypto currency, these guys get off scott free with huge sums
thisisit 9y ago
Oh, this brings back memories. Back in 2013/2014 when bitcoin first touched 1k, I got to know some of these groups. First, there are positive campaigns run for multiple coins through YT channels (some really respected ones), reddit posts, bitcointalk forum etc. Once enough frenzy is generated a pump date is announced but not the coin name. The coin name depends on various factors like -how many coins these guys have accumulated, which coin is generating some vibe outside their efforts, how much of the supply has been mined etc. Once the time arrives, the coin name is announced in the chat group, twitter etc. And the coin price flies on a particular exchange. It seems obvious that the price should tank. But it doesn't. Because there are a lot of things going on here: a. In the cryptocurrency world, everyone has a constant FOMO fever. So, if they see a coin flying they buy irrespective. b. Then there is lot of belief in technical analysis too. So, if there is some MA crossover, RSI crossever etc happens then people buy irrespective. c. There are a lot of "arbitragers" who have automated setups to try and catch up the difference. So they sell at the high price exchange and buy at low price exchange. But, the imperfect market ensures that they actually end up pulling the price at the lower exchange. The price does drop but it doesn't go to the previous low price. d. Lastly and most importantly the orderbook gets messed up and price is re-framed. These coins are thinly traded. So, there is some form of equilibrium at the low price - there are both buyers and sellers at this price. Once the pump is over the price has inched higher. The bag holders have bought the coins at a higher price so they wont sell for a loss. Then the FOMO, TA and arbs come in to create an equilibrium market at the higher prices. Things don't end there. The pump and dump schemers also are unable to get out at the high so, they keep creating positive buzz for the coins. In most cases, the same coin gets pumped up by many (or maybe same) groups multiple times. Look at the chart for the Magi Coin mentioned in the article: https://coinmarketcap.com/currencies/magi/#charts https://coinmarketcap.com/currencies/magi/#charts It is going higher and higher. If you look at the market on bittrex, which btw is the go to market for these schemes: https://bittrex.com/Market/Index?MarketName=BTC-XMG https://bittrex.com/Market/Index?MarketName=BTC-XMG you will find multiple price swings, which are actually prices being pumped. Does it work for big coins? Yes it does. But, those are much more nuanced than telling people to pump a coin. There it takes form of some announcement - mostly it is a vaporware feature which remains WIP for a long time or some collaboration.

174 points by bradvl 9y ago

How traders pump and dump sub 50 btc volume coins is a more accurate title. Manipulating a coin with 1k+ volume is significantly harder.

godelski 9y ago
I've been hearing talk about 1k people own >40% of BTC[1]. I think having that kind of market share gives you that kind of power, especially if you coordinate your moves (like the article suggests). This article more seems like spammers. Same kind of thing that the stock spammers did with emails. There's a nice DefCon video about this [2]. Basically some people have a lot of the stock (or coin), get people to buy, and dump on them. I think the evidence that people have been doing this with the smaller stock exchanges show that it can be done with BTC. I think if you watch BTCs price long enough, you can even see these patterns. [1] https://www.bloomberg.com/news/articles/2017-12-08/the-bitcoin-whales-1-000-people-who-own-40-percent-of-the-market https://www.bloomberg.com/news/articles/2017-12-08/the-bitco... [2] https://www.youtube.com/watch?v=ytDamqTjPwg https://www.youtube.com/watch?v=ytDamqTjPwg
- VMG 9y ago
  > I've been hearing talk about 1k people own >40% of BTC[1]. That seems dubious. These numbers usually don't account for custodial wallets e.g. exchanges
  - atmosx 9y ago
    "The Bitcoin system is the best known and most widely used alternative payment scheme, but so far it was very difficult to get accurate information about how it is used in practice. In this paper we describe a large number of statistical properties of the Bitcoin transaction graph, which contains all the transactions which were carried out by all the users until May 13th 2012. We discovered that most of the minted bitcoins remain dormant in addresses which had never participated in any outgoing transactions. We found out that there is a huge number of tiny transactions which move only a small fraction of a single bit- coin, but there are also hundreds of transactions which move more than 50,000 bitcoins. We analyzed all these large transactions by following in detail the way these sums were accumulated and the way they were dispersed, and realized that almost all these large transactions were descendants of a single transaction which was carried out in November 2010. Finally, we noted that the subgraph which contains these large transactions along with their neighborhood has many strange looking structures which could be an attempt to conceal the existence and relationship between these transactions, but such an attempt can be foiled by following the money trail in a sufficiently persistent way." - Dorit Ron and Adi Shamir ref: https://eprint.iacr.org/2012/584.pdf https://eprint.iacr.org/2012/584.pdf
  - quickthrower2 9y ago
    Yes, plus how to tell the difference between hodlers and lost keys?

Timbaker 9y ago

These days, iN KOREA, it is crazy!! Several days, it shows going down tread, but in las weekend it goes up and upper! you guys, I want to ask you, how long does this situation go?

electic 9y ago

I am on Telegram and none of these channels really have any bearing on pumping a coin. There might be some movement on smaller coins but these channels rarely play a major part. Typically what happens, is a whale starts buying a particular currency and magically you start to see news articles appear on major and smaller niche crypto blogs. Then the reddit posts start appearing causing a even more hurried frenzy to buy the coin. It is very similar to how traditional stocks are pumped. On a side note, I am noticing a trend from Forbes, Business Insider, and CBS News that are very hostile to the crypto space. They will literally grasp at any resemblance of shadyness to write a negative article.

autokad 9y ago
feels like a fear and smear campaign to allow the government sweeping authorities and regulations "for everyone's own good" that probably offer little help to the problem the fear and smear campaign was calling out.

nkrisc 9y ago

The current link anchors to the bottom of the page.

sctb 9y ago
Thanks, we've removed that from the link.

cyphunk 9y ago

you had me at... "Russian messaging app Telegram is heavily encrypted and,..." enough of the mccarthyism. anyway, time to log off of my freedom infused american hacker news app and go work for a bit in my almost fascist italian code editor on my communist chinese computer

skinnymuch 9y ago
It's not even really Russian. It's based in Germany. Pretty sure the founder and his brother of VK fame haven't been back to Russia since Telegram was created. Either are dual citizens or only have non-Russian passports now too.
deleted 9y ago
[deleted]

vim_wannabe 9y ago

Sounds more like whale/s telling people to raise the price of a coin then dumping on them, rather than some kind of a 'collaborative' pump. The article is talking about minutes after all so there's likely no outside buyers fast enough to react. Essentially most 'members of the community' will lose, but some lucky ones will be fast enough to dump before the whale for at least some cash.

ceejayoz 9y ago
You're probably right - the folks in this group think they're running the scam, but they're mostly (unsympathetic) victims of it. Safe bet the admin's purchasing the coin before sending the "pump FooCoin!" message, and dumping it before sending the "make it crash now" one.
KVFinn 9y ago
>The article is talking about minutes after all so there's likely no outside buyers fast enough to react. The article doesn't talk about it, but there are campaigns organized over days and weeks to talk up a coin. It's not all about minute timescales.
- mancerayder 9y ago
  Do you have evidence of these? Don't get me wrong, I believe you, but convincing evidence, even anecdotal, would be useful. Of the big coins, not the hundreds of random ones with "To The Moon" Reddit comments.
  - KVFinn 9y ago
    >Of the big coins, not the hundreds of random ones with "To The Moon" Reddit comments. In terms of personal experience, I've not seen anything as explicit as this article. And nothing with a giant market cap coin. More like a gray area between pump and dump and a bunch of over enthusiastic marketers. Like I'll be reading a forum and notice a ton of people hyping up a small market cap coin. Check their post histories and they are generally new or they've only talked about the coin. Eventually find the slack/discord for the coin, people are posting links to forums/threads/mentions of the coin in the discord, and people are organizing shifts to give support. The comments are all purportedly coming from a genuine place (and to an extend they may be) but they were posted as if they were just random people stumbling across this discussion -- not an organized group explicitly trying to spread the good word.

deleted 9y ago

[deleted]

blcArmadillo 9y ago

Is coordinated buying really considered pumping? Don't you also have to distribute misleading information?

jeremyt 9y ago

This article is complete bullshit. I'm a member of this group, only because I was added without my consent, which is probably the case for most of the users in the group. Just for giggles, I watched them do a pump and dump one time, and they basically sold the pump hard, managed to get about 10 Bitcoin in some tiny market cap coin, and then one guy sold all the way back down and left the "members" of the group holding the bag. This group is a scam, but not in the way that this article says. Also, telegram isn't encrypted as far as I know.

jsmthrowaway 9y ago
> Also, telegram isn't encrypted as far as I know. Sure it is. There are (optional) E2E one-on-one secret chats. Doing E2E for a group is obviously a bit harder, as that's broadcast or multicast encryption -- think the DirecTV problem -- but the protocol itself is encrypted nonetheless. https://en.wikipedia.org/wiki/Telegram_(messaging_service)#Encryption_scheme https://en.wikipedia.org/wiki/Telegram_(messaging_service)#E...
- fwn 9y ago
  Optional end to end encryption with an additionally crippled UX just means 1. no used end to end encryption in practice and 2. a worse reputation for e2e as a whole. Telegram has it as much as Facebook Messenger has it. It's a fig leaf.
jcoffland 9y ago
Telegram's key feature is encryption. https://telegram.org https://telegram.org
- neuralzen 9y ago
  Only on phones, there is no option to encrypt on desktop.
  - jcoffland 9y ago
    According to their website all data is encrypted. From what I understand it's transparent and does not require enabling via an option.

cowpig 9y ago

I have a feeling these businessinsider articles are actually coming from the pump and dump groups' press kits.

m3kw9 9y ago

Happening every day at the penny stock stalls in small doses, but in crypto currency, these guys get off scott free with huge sums

thisisit 9y ago

Oh, this brings back memories. Back in 2013/2014 when bitcoin first touched 1k, I got to know some of these groups. First, there are positive campaigns run for multiple coins through YT channels (some really respected ones), reddit posts, bitcointalk forum etc. Once enough frenzy is generated a pump date is announced but not the coin name. The coin name depends on various factors like -how many coins these guys have accumulated, which coin is generating some vibe outside their efforts, how much of the supply has been mined etc. Once the time arrives, the coin name is announced in the chat group, twitter etc. And the coin price flies on a particular exchange. It seems obvious that the price should tank. But it doesn't. Because there are a lot of things going on here: a. In the cryptocurrency world, everyone has a constant FOMO fever. So, if they see a coin flying they buy irrespective. b. Then there is lot of belief in technical analysis too. So, if there is some MA crossover, RSI crossever etc happens then people buy irrespective. c. There are a lot of "arbitragers" who have automated setups to try and catch up the difference. So they sell at the high price exchange and buy at low price exchange. But, the imperfect market ensures that they actually end up pulling the price at the lower exchange. The price does drop but it doesn't go to the previous low price. d. Lastly and most importantly the orderbook gets messed up and price is re-framed. These coins are thinly traded. So, there is some form of equilibrium at the low price - there are both buyers and sellers at this price. Once the pump is over the price has inched higher. The bag holders have bought the coins at a higher price so they wont sell for a loss. Then the FOMO, TA and arbs come in to create an equilibrium market at the higher prices. Things don't end there. The pump and dump schemers also are unable to get out at the high so, they keep creating positive buzz for the coins. In most cases, the same coin gets pumped up by many (or maybe same) groups multiple times. Look at the chart for the Magi Coin mentioned in the article: https://coinmarketcap.com/currencies/magi/#charts https://coinmarketcap.com/currencies/magi/#charts It is going higher and higher. If you look at the market on bittrex, which btw is the go to market for these schemes: https://bittrex.com/Market/Index?MarketName=BTC-XMG https://bittrex.com/Market/Index?MarketName=BTC-XMG you will find multiple price swings, which are actually prices being pumped. Does it work for big coins? Yes it does. But, those are much more nuanced than telling people to pump a coin. There it takes form of some announcement - mostly it is a vaporware feature which remains WIP for a long time or some collaboration.