Early Warning for Pump & Dump Activities in the Cryptocurrency Market

Abstract

The market's integrity and investor confidence are being threatened by the growth of pump and dump (P&D) operations in the cryptocurrency market. This research seeks to explore the motivations, strategies and effects of these acts of manipulation, thus having all the information needed to achieve the goal of building an early warning system, that can identify and mitigate P&D schemes by utilizing large datasets including cryptocurrency transactions and market behaviors. The difficulties arising from the decentralized and largely unregulated nature of cryptocurrencies should be highlighted, underscoring the need for improved regulatory frameworks in this developing financial sector. Identifying the critical elements and trends related to price pumps in the cryptocurrency market is the main focus of the research. The research outlines several objectives to address this: starting with a careful literature review that would provide an initial understanding of these phenomena. The first step is to examine past market data to identify the traits and occurrences of price pumps, so as to get an overall view. A second step would be to investigate possible contributing elements and determine how they relate to price manipulation. These factors may include trading volume, liquidity, market sentiment, and particular occurrences.Through the analyses carried out, the research seeks to create predictive models or frameworks to detect and anticipate price pumps in real time, assessing how accurately they can predict a P&D or not, safeguarding the market. New regulatory tools and customized legislative measures, which will increase openness and trust in the cryptocurrency space, can be introduced through this tool. The ultimate goal of the results is to provide market participants and investors with information that enables them to make wise decisions and take preventive actions to reduce the negative consequences of dishonest behavior.