Schemes are extensive in the cryptocurrency market. P&Ds lead to short-term bubbles featuring dramatic increases in prices, volume, and volatility. Prices peak within minutes and quick reversals follow. The evidence we document, including price run-ups before P&Ds start, implies significant wealth transfers between insiders and outsiders. Bittrex, a cryptocurrency exchange, banned P&Ds on November 24, 2017. Using a difference-in-differences approach, we provide causal evidence that P&Ds are detrimental to the liquidity and price of cryptocurrencies. We discuss potential mechanisms why outsiders are willing to participate and describe how our findings shed light on its theories.

1. Crypto- Schemes
Abstract
Schemes are extensive in the cryptocurrency market. P&Ds lead to short-term
bubbles featuring dramatic increases in prices, volume, and volatility. Prices peak
within minutes and quick reversals follow. The evidence we document, including
price run-ups before P&Ds start, implies significant wealth transfers between
insiders and outsiders. Bittrex, a cryptocurrency exchange, banned P&Ds on
November 24, 2017. Using a difference-in-differences approach, we provide
causal evidence that P&Ds are detrimental to the liquidity and price of
cryptocurrencies. We discuss potential mechanisms why outsiders are willing to
participate and describe how our findings shed light on its theories.
 Pump and Dump Schemes;
 “Pump-and-dump” schemes in the cryptocurrency market. P&D is a form of
price manipulation that involves artificially inflating an asset price before
selling the cheaply purchased assets at a higher price. Once the assets are
“dumped”, the price falls, and investors lose money. Such schemes are
most common with microcap stocks and have recently become popular in
the cryptocurrency market. The U.S. Securities and Exchange Commission
(SEC) deems P&Ds illegal in the stock market, but the regulation of P&Ds in
the cryptocurrency market is weak or nonexistent. Many cryptocurrencies
are difficult to justify either as investment or consumer products and do
not fit neatly into existing securities or consumer-protection laws. The

2. regulation of cryptocurrencies also requires more global coordination than
other assets since they typically are traded globally.
 Relative to the stock market, on which most existing studies have focused,
our setting provides several advantages for investigating P&Ds. First, in the
cryptocurrency market, a typical P&D episode lasts for only several
minutes, while such an episode frequently lasts for months in the stock
market. Many other factors can cloud inferences when pumps last that
long. Second, there is typically no false information release or company
action associated with P&Ds in the cryptocurrency market, reducing the
occurrence of information- or action-based manipulation.
Digital Asset
 A cryptocurrency is a digital asset designed to work as a medium of
exchange. Individual coin ownership records are stored in a digital ledger
using cryptography to secure transaction record entries, control the
creation of additional digit units, and verify digital assets’ transfer. A
cryptocurrency can be a (digital) coin or a token. A coin is a digital
equivalent of money and is native to its blockchain. Coins have similar
characteristics as money: they are fungible, divisible, portable, and have
limited supply. A token is a digital asset issued by a particular project, which
provides a specific set of rights to its holders, including access to a platform
or network, the right to create or develop features for an ecosystem, and
the right to vote, among others. Tokens typically operate on other
blockchain platforms, such as Ethereum. Most tokens are “utility tokens” as
they are used within decentralized applications and their networks.7 Most
secondary market trading in cryptocurrencies occurs on online exchanges.
Cryptocurrencies are typically listed on one or more exchanges. Exchanges
operate 24 hours a day, 365 days a year. Limit orders provide liquidity and
are rewarded by the exchanges with lower trading commissions.
P&D Events
 There exists no central database of P&D events. We, therefore, manually
construct a sample. We first collect a list of pump groups from Reddit and
Bitcoin Talk, two popular cryptocurrency message boards. Pump groups
typically advertise on these boards to attract participants. For

3. completeness, we also conduct an internet search for additional
advertisements posted by such groups.
 Cryptopia, respectively. 13 Based on the number of listed cryptocurrencies,
these four exchanges are all among the top ten largest exchanges at that
time. As pump groups do not switch exchanges frequently and conduct
pumps regularly, it is not surprising that they only target exchanges with a
sufficient number of potential targets, where they can hide their target
cryptocurrency identity until they make the scheduled announcements.
CoinMarketCap
 Our exchange trading data may not cover all the trading activities of a
cryptocurrency if it is cross-listed on exchanges other than Binance, Bittrex,
and Yobit. We, therefore, also obtain data from CoinMarketCap.com.
CoinMarketCap is widely considered the top source for trading information
on cryptocurrencies. The data CoinMarketCap provides are not trade-by-
trade records but aggregated at the daily level. For each day,
CoinMarketCap reports price (volume-weighted across exchanges), total
volume, and market capitalization. CoinMarketCap does not cover all
cryptocurrencies but tends to feature larger and more liquid ones.
P&D’s Distribution by Hour and exchange

4. Trading Volume By hour and Exchange
Maximum Returns

5. Conclusion: Reports the results on the Ethereum pairs on the same exchange.
Panel B reports the results on the Bitcoin pairs on other exchanges. Pumped
cryptocurrencies with trading data on Ethereum, report maximum returns,
abnormal volume, and the volatility of the Ethereum pairs. Pumped
cryptocurrencies with trading data from other exchange, we report maximum
returns and the volatility of these cross-listed cryptocurrencies on the non-
targeted exchange(s).