Pump and Dump Detection Test
Description
This test identifies potential market manipulation activities characterized by rapid price changes in trading patterns. It analyzes trading data to detect two specific scenarios: (1) Pump-and-Dump: A sudden price increase (pump) followed by a sharp decline (dump). (2) Dump-and-Pump: An initial price drop (dump) followed by a rapid recovery (pump).
Use Cases
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Market Manipulation Detection: Identifies instances of coordinated trading activity designed to artificially inflate or deflate asset prices.
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Investor Protection: Detects manipulation patterns that can harm investors by luring them into buying overvalued assets during a pump or selling undervalued assets during a dump.
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Regulatory Compliance: Monitors for trading activities that violate financial regulations related to fair market practices, supporting adherence to anti-manipulation laws and preventing fraudulent schemes.
Required Data
Trades Data
| Variable | Description |
|---|---|
timestamp | Timestamp of the trade (YYYY-MM-DD hh:mm:ss). |
user_id | User ID to identify the individual user. |
symbol_pair | Asset symbol; e.g., BTCUSDT, SHIBETH. |
price_usd | Price of the symbol in USD. |
amount | Amount of the symbol being traded. |
side | Whether the trade is a BUY or SELL. |
transaction_id | Unique transaction identifier. |
order_id | Unique order identifier. |
price | Quote currency value; e.g., ETH/BTC = 0.03781. |
Parameters
| Parameter | Description | Type | Default Value | Configurable |
|---|---|---|---|---|
first_window | Duration of the initial pump or dump period in hours. | Timedelta | 4 hours | Yes |
second_window | Duration of the subsequent dump or pump period in hours. | Timedelta | 12 hours | Yes |
pump_threshold | Minimum percentage price increase to flag a pump event. | Float | 0.2 | Yes |
dump_threshold | Minimum percentage price decrease to flag a dump event. | Float | 0.15 | Yes |
analysis_minimum_aggregate_dollar_threshold | Minimum aggregate dollar value of flagged transactions per user. | Float | 10000.0 | Yes |
adv_percentage_threshold | The percentage of ADV that net aggregated trades must exceed to trigger an alert. | Float | 0.0 | Yes |
analysis_profit_percentage_threshold | Minimum profit percentage to flag user. | Float | 0.05 (5%) | Yes |
adv_window | Number of days used to calculate the Average Daily Volume (ADV). | Integer | 7 | Yes |
Methodology
- Identify Pump-and-Dump Events**
- Detect rapid price increases in the pump window followed by significant declines in the dump window.
- Assign unique identifiers to tagged events for tracking and further analysis.
- Aggregate and Compare Trade Metrics**
- Calculate total buy and sell volumes, dollar amounts, and profitability.
- Flag users with disproportionate trading activity across events.
- Apply Filtering Criteria**
- Filter by ADV, profitability, and buy/sell proportions.
- Highlight users engaging in strategic sell-to-buy transitions.
- Visualize, Report, and Alert**
- Generate reports summarizing flagged users with transaction details.
- Provide graphical representations of price movements and trading patterns.