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Pump-and-dump “manipulation” plagues the cryptocurrency markets

Professor Putnins said free brokerage, lockdown boredom and social trading have increased the success of pump-and-dump programs in the stock market. Delivered

Mr Putnins said retailers are drawn to the scams even though it is a zero-sum game where the wealth is redistributed from the participants to the manipulators.

“The propensity to gamble increases in times of fear, isolation and boredom,” he said. “That explains why these games are so popular. They are a form of manipulation that we have not yet seen in traditional markets. There is no trickery here, the manipulation takes place in broad daylight. “

On average, manipulators buy around $ 24.3 million worth of coins in front of a pump signal. This results in a conservatively estimated profit of $ 6 million per pump by smoothing out the differences in volume-weighted average prices before and after a pump signal, according to the study.

Beyond the law

Pump-and-dump networks can include loose links from social media celebrities, financial or crypto influencers, altcoin issuers, organized cyber criminals, and millions of speculators addicted to meme-driven fantasies of instant, simple wealth.

“And that’s in part due to the perceived lack of regulation,” Putnins said. “And also because of new technologies such as encrypted chat forums, which enable people to feel safe during such illegal activities without getting caught.”

Operators of stock market pump-and-dump systems who exchange inside information have long had to face severe criminal penalties. However, the explosive rise and cross-border nature of crypto has left global lawmakers unsure of how to regulate it.

In Australia, ASIC and lawmakers have also come under fire for not taking regulation of the cryptocurrency market seriously.

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