Monday, August 6, 2018

ANALYSIS: The Massive Pump and Dump Operations Surrounding Bitcoin



For a long time, I have charged that Bitcoin rather than being a Ponzi scheme, is really a "pump and dump" operation.

In December 2013, I wrote:
[I] t is a classic pump and dump scheme. 

Since then there have been many phases to the pump and dump. Some of which in the EPJ Daily Alert, I have advised aggressive investors to trade.

But I do admit that it is an overall spectacular  pump and dump operation: In April of this year, I quoted Bill Harris, former CEO of Intuit and founding CEO of PayPal, who said:

In my opinion, it’s a colossal pump-and-dump scheme, the likes of which the world has never seen. In a pump-and-dump game, promoters “pump” up the price of a security creating a speculative frenzy, then “dump” some of their holdings at artificially high prices. And some cryptocurrencies are pure frauds. Ernst & Young estimates that 10 percent of the money raised for initial coin offerings has been stolen.
The losers are ill-informed buyers caught up in the spiral of greed. The result is a massive transfer of wealth from ordinary families to internet promoters. And “massive” is a massive understatement — 1,500 different cryptocurrencies now register over $300 billion of “value.”...Promoters claim cryptocurrency is valuable as (1) a means of payment, (2) a store of value and/or (3) a thing in itself. None of these claims are true.

And now this from The Wall Street Journal, which has uncovered what appears to be mini-pump and dump operations withn in the greater pump and dump:
Dozens of trading groups are manipulating the price of cryptocurrencies on some of the largest online exchanges, generating at least $825 million in trading activity over the past six months—and hundreds of millions in losses for those caught on the wrong side, according to a Wall Street Journal analysis
In a review of trading data and online communications among traders between January and the end of July, the Journal identified 175 “pump and dump” schemes involving 121 different digital coins, which show a sudden rise in price and an equally sudden fall minutes later.. 
.A pump-and-dump scheme is one of the oldest types of market fraud: Traders talk up the price of an asset before dumping it for a profit and leaving fooled investors with shrunken share...
The boiler rooms of yore have an online analog in the “pump group,” a chatroom where coin traders gather. The biggest of the dozens the Journal analyzed is Big Pump Signal, with more than 74,000 followers on the messaging app Telegram. It is also the most prolific: After launching its chatroom on Telegram in late December after reaching capacity on another messaging app, Discord, the group promoted 26 pump operations that saw $222 million in trades.
Many more such groups exist, potentially adding millions or tens of millions more in activity, the Journal found, but operate in private chat rooms, accessible only by invitation, generally overseen by a anonymous moderator.

-RW