June 24, 2021

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GameStop FOMO inspires a new wave of crypto pumps and dumps

3 min read


Discord is a perfect vehicle for these pumps, as a semi-public forum that allows users to advertise servers on a large scale, ask users for coordinated subscriptions, and discuss strategy. I’ve been a long-time Discord user, and anecdotally, I’ve seen a huge increase in activity. Between early April and May, I received 47 invitations to join crypto pump groups on Discord. Eight of the groups have more than 20,000 members; the largest has over 80,000 members. Several of the moderators of these servers say they pay people – whom they call “advertisers” – to spam Discord users with invites, sometimes including crypto giveaways.

New members are greeted with FAQs describing 2000% push-ups and the potential for hundreds or thousands of payouts. This is not necessarily the reality. “The Discord server is a casino. As the saying goes, “home always wins,” and that’s home, ”says Thomas Hurley, 21, a member of several crypto pump Discord servers. After crypto evangelists started joining his game servers to announce pumping groups, he tried his hand at some coordinated price pressures. He never made much profit, but others have. When Hurley started taking a closer look at some of these coins market trading pages on sites like Binance, he noticed some interesting patterns.

“A few seconds before they announced which part to pump, there would be a huge spike,” he says. It looked like someone in the know had bought much of the coin in advance, greatly increasing its potential to make big by selling early. Hurley never had a chance.

He is not alone. A 2018 study Telegram-based pump groups found that five minutes before the pump signal (before the part was even revealed), the price of a designated part had climbed by about 5%. Back then, on average, only investors who bought within the first 20 seconds after a pump could make a profit. Today, sources say, crypto pumps are moving so fast that enthusiasts are ordering bots to buy and sell coins based on Discord announcements. Server owner Pump It Up says he lost several hundred dollars because he didn’t use a bot, which can buy and sell in milliseconds. The experience prompted him to form his own group in February.

“Crypto pumps the prey of less informed people into space,” says Josh Kamps, a PhD student at University College London who studies crypto-fraud. People who discovered GameStop late want to take the next big step. Kamps noticed, anecdotally, that a bunch of low-utility alternative coins popping up around this time, which he said are “pretty much designed to be pumped.” For example, he says, pumping groups are flocking to Shiba Inu Coin (or SHIB). A WallStreetBets pumping group reported that they pumped SHIB for over 4x profits. In the past 24 hours, the coin itself has seen a trading volume of over $ 6.1 billion.

“Discord hosts a wide variety of personal finance discussions, including cryptocurrency, investment clubs, and day traders, and encourages creative uses of our platform, as long as nothing compromises our values ​​or constitutes illegal activity, “said a spokesperson for Discord in an email to FILAIRE. They cautioned Discord users to carefully research the advice they receive on the internet.

Crypto pump systems fall into a gray legal area. “There is a lot of debate about whether we consider cryptocurrencies to be securities or not,” says Donghwa Shin, professor at the University of North Carolina at Chapel Hill, co-author of the 2018 study. Pumping and dumping are illegal for titles. Not cryptocurrencies. “That’s why there are no clear regulations,” he says. Shin thinks it’s time for that to change. According to his research, the liquidity and value of these currencies increase in crypto exchanges where pumps and discharges are prohibited. Not only is the market improving; it would be more difficult for the small fraction of the people who organize these push-ups – the people who benefit most often from them – to take advantage of others.



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