Study: Pump and Dump Schemes Account for $7 Million of Monthly Trade Volume

A recent study has found that pump and dump schemes account for about $7 million worth of trading volume per month, MIT Technology Review reported Dec. 4.

A pump and dump scheme is a form of securities fraud that has also become common in the cryptocurrency space.

While cryptocurrency markets are currently in a rut, with some coins reaching new lows in the month of November, daily trade volume is currently $14.2 billion, according to CoinMarketCap.

The pump and dump volume cited in the study only accounts for 0.049 percent of total 24-hour trade volume.

In the course of their research, the analysts reportedly focused on a pump and dump scam with a coin called BVB, that happened on Nov. 14, 2018.

McAfee Pump Signals reportedly revealed BVB, which had been dormant for over a year by that time, with little trading activity and a value of about 35 satoshi.

It took the participants "Three and half minutes after the start of the pump and dump" to take their profits, after which "The coin price had dropped below its open price," the researchers said.

"The study reveals that pump and dump organizers can easily use their insider information to take extra gain at the sacrifice of fellow pumpers."

Xu and Livshits appealed to the historical data from known pump and dump schemes to train a machine learning algorithm to trace telltale signs that a scam will soon occur.

The WSJ suggested that coordinated "Pump and dump" schemes had seen traders inflate and crash the prices of various cryptocurrencies this year.