A blog post by AnChain detailed the findings of their team’s recent investigations into the LINK token. The research found what they believe to be evidence of a pump and dump. It is important to note that this type of manipulation occurs no matter the legitimacy of the team or a project. Bad market actors, as the medium article puts it, are coordinated “highly concentrated crypto cabals.”
What’s a Pump and Dump
To anyone who has been in the cryptocurrency space for a while, it should be relatively clear what a pump and dump might look like; leaving out the technicalities. It generally involves a low priced/low market cap token that magically becomes the must have crypto with a seeming rush to buy.
In this case, it was clear that the 4chan “biz” section was a hive for much of this coordination for those looking to manipulate the LINK market. From there, their army of various Pepe avatar’s flooded social media with LINK related content and commentary; factual or not.
Below the surface is where the AnChain team comes in. Working
with the tide of social media activity, technically savvy individuals appear to
have used both traditional and sophisticated methods to manipulate the market
price of LINK.
One of the more traditional methods they uncovered where several addresses coordinate trades between each other. Matched with jump addresses through their tracking, all signs point towards inorganic market activities.
A more sophisticated method was uncovered by:
“By examining the small amounts of ETH transfer flows used for token transfer gas fees, we can see that all the ETH sent to the jump addresses are sourced from mining nodes (0xea678ec8, 0x2a658226). This is a sophisticated tactic that hides the player’s real address.”
“Despite such a large number of jump addresses, we can trace the source back to exchanges…and observe that many of the direct, or second hop, receiver addresses from these exchanges are wallets…that hold large amounts of ETH.”
Many suspicious accounts can now be monitored. This will help
predict the next attack on LINK or another token. As well, it will provide more
opportunity to observe fraudulent trading and market manipulation tactics.
This is by no means limited to LINK. These pump and dumpers are the scorn of the cryptos world as their motives are clearly not based on the technology. While the article recommends legislation and regulation, I must wonder how this would work in a global setting with cross-jurisdiction; especially when anyone can use a permissionless blockchain. I think the best thing to do is continuously work to track those accounts so they can be prosecuted with all their manipulative tactics right there for all to see. As well, a more mature market will limit the opportunities for many of these manipulators.