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The world of cryptocurrencies sees its fair share of scams, hacks, frauds, illicit trading behavior, and other malicious activities regularly. However, the sector witnessed something entirely different on October 11 after a crypto-exchange voluntarily participated in a “pump and dump” to attract investors and create hype for its business.
Cryptocurrency exchange YoBit performed a pump and dump (P&D) on random altcoins listed on its trading services on Thursday, after tweeting about this plan a day earlier. Users of the social network initially argued about a possible hack of YoBit’s twitter account, but a look on its website displayed a countdown timer that ticked towards the impending pump.
YoBit Pump in 22 hrs: https://t.co/RIbW7OhKzM
We will buy one random coin for 1 btc every 1-2 mins 10 times (total buy amount – 10 btc).
— Yobit.Net (@YobitExchange) October 10, 2018
P&Ds are a regular fixture of the thinly-regulated cryptocurrency markets and a criminal act in the traditional security bourses. The scheme involves a large holder of a particular cryptocurrency exiting their position at market price, leading to a quick over-supply of tokens which causes prices to plunge rapidly. Similarly, a pump occurs when considerable money, in fiat, tether, or BTC, is used to purchase a large number of tokens, causing over-demand and a steep increase in price.
Altcoin markets on exchanges like Binance and Bitfinex are the easiest to pump. With low volumes – often not exceeding 50 BTC – a “whale,” active trade, or a group of large holders can rapidly purchase a particular altcoin to attract outside investors into the pump and continue to add on to demand. However, the P&D traders quickly exit their positions at a profit, leaving retail traders with little time to liquidate their positions and possibly face losses as prices fall back to pre-pump levels.
Now, seems like YoBit is publicly employing the shady tactic to attract investors and much-needed liquidity to its business. The exchange lists over 438 altcoins, including obscure ones like LiteDoge and Fire Lotto, making predicting pumps a difficult guess. As stated in its tweet, the exchange will pump a low cap coin by one bitcoin every minute, for a total of ten bitcoins in ten minutes.
Russian Coin First to Pump
At the time of writing, the exchange has pumped PutinCoin, a Moscow-based cryptocurrency that positions itself next to Bitcoin. The currency jumped by 1000 percent immediately after a total of 129 BTC pumped the altcoin.
Meanwhile, Twitter users are not impressed. User @noBSCrypto even brought attention to Commodity Futures Trading Commission’s guidelines on such activities in his post:
— Chris Koerner (@noBScrypto) October 10, 2018
Interestingly, YoBit is not a newcomer business to indulge in such tactics to gain coverage. The Russia-based exchange was founded in 2015 and positions itself as a Bitcoin Cash-focused business. However, it has come under the scanner multiple times after users complained of withdrawal issues earlier this year and faced suspicious of fraud in 2017.
Last year, an investigation led by Business Insider revealed traders on YoBit were conducting pump and dumps by coordinating on Russian messaging app Telegram. However, it remained unclear whether the exchange was aware of the pump and dump activity, as the exchange did not respond to any of the publication’s emails.