The Doge of Wall Street: Analysis and Detection of Pump and Dump
Cryptocurrency Manipulations
- URL: http://arxiv.org/abs/2105.00733v1
- Date: Mon, 3 May 2021 10:20:47 GMT
- Title: The Doge of Wall Street: Analysis and Detection of Pump and Dump
Cryptocurrency Manipulations
- Authors: Massimo La Morgia, Alessandro Mei, Francesco Sassi and Julinda Stefa
- Abstract summary: This paper performs an in-depth analysis of two market manipulations organized by communities over the Internet: The pump and dump and the crowd pump.
The pump and dump scheme is a fraud as old as the stock market. Now, it got new vitality in the loosely regulated market of cryptocurrencies.
We report on three case studies of pump and dump. Then, we leverage our unique dataset of the verified pump and dumps to build a machine learning model able to detect a pump and dump in 25 seconds from the moment it starts.
- Score: 63.732639864601914
- License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
- Abstract: Cryptocurrencies are increasingly popular. Even people who are not experts
have started to invest in these securities, and nowadays, cryptocurrency
exchanges process transactions for over 100 billion US dollars per month. In
spite of this, many cryptocurrencies have low liquidity, and therefore, they
are highly prone to market manipulation. This paper performs an in-depth
analysis of two market manipulations organized by communities over the
Internet: The pump and dump and the crowd pump. The pump and dump scheme is a
fraud as old as the stock market. Now, it got new vitality in the loosely
regulated market of cryptocurrencies. Groups of highly coordinated people
arrange this scam, usually on Telegram and Discord. We monitored these groups
for more than 3 years detecting around 900 individual events. We analyze how
these communities are organized and how they carry out the fraud. We report on
three case studies of pump and dump. Then, we leverage our unique dataset of
the verified pump and dumps to build a machine learning model able to detect a
pump and dump in 25 seconds from the moment it starts, achieving the results of
94.5% of F1-score. Then, we move on to the crowd pump, a new phenomenon that
hit the news in the first months of 2021, when a Reddit community inflates the
price of the GameStop stocks (GME) of over 1,900% on Wall Street, the world's
largest stock exchange. Later, other Reddit communities replicate the operation
on the cryptocurrency markets. The targets were Dogecoin (DOGE) and Ripple
(XRP). We reconstruct how these operations developed, and we discuss
differences and analogies with the standard pump and dump. Lastly, we
illustrate how it is possible to leverage our classifier to detect this kind of
operation too.
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