LLD: A Low Latency Detection Solution to Thwart Cryptocurrency Pump & Dumps

Ahmad Sani Bello, Jens Schneider, Roberto Di Pietro

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

2 Scopus citations

Abstract

Pump and Dump schemes represent a threat to any market. While this issue has long been regulated in mature markets, in unregulated markets, such as crypto exchanges, this plague is very present, and even exacerbated by the low capitalizaton of many cryptocurrencies that represent the perfect target for such a fraudulent scheme. In this paper, we detail a Low Latency Detection solution (LLD) based on deep learning to automatically detect pump and dump activities on centralized cryptocurrency exchanges. We train a LSTM-based auto-encoder on BTC valuations, which can reliably be considered a proxy for regular trading-due to their larger capitalization. We use this auto-encoder to predict valuations on alt coins and use thresholding on a Gaussian tail condition to trigger detection. We argue that low latency detection is paramount for the practicality of such approaches. Unlike previous methods, our solution (LLD) detects the majority of pumps in less than five minutes (2.2 minutes on average) when using OHLCV data at one-minute resolution. In addition, we use social media data only to generate ground truths during testing. We show that in many cases a significant amount of the trade volume could have been saved had LLD been used to trigger trade suspension mechanisms. The idiosyncratic approach of our scheme, its sound rationale and viability, combined with the quality of achieved results-tested over an extensive experimental campaign-and the insights discussed in the paper also pave the way for further research in the field.

Original languageEnglish (US)
Title of host publication2023 IEEE International Conference on Blockchain and Cryptocurrency, ICBC 2023
PublisherInstitute of Electrical and Electronics Engineers Inc.
ISBN (Electronic)9798350310191
DOIs
StatePublished - 2023
Event5th IEEE International Conference on Blockchain and Cryptocurrency, ICBC 2023 - Dubai, United Arab Emirates
Duration: May 1 2023May 5 2023

Publication series

Name2023 IEEE International Conference on Blockchain and Cryptocurrency, ICBC 2023

Conference

Conference5th IEEE International Conference on Blockchain and Cryptocurrency, ICBC 2023
Country/TerritoryUnited Arab Emirates
CityDubai
Period05/1/2305/5/23

Bibliographical note

Funding Information:
This publication was made possible by NPRP grants #0130-200207 and #11C-1229-17000, both from the Qatar National Research Fund (a member of Qatar Foundation). The findings herein reflect the work, and are solely the responsibility, of the authors. 1https://coinmarketcap.com, accessed 18-Dec-2022. 2We use the term “pump” synonymously to “Pump and Dump”.

Publisher Copyright:
© 2023 IEEE.

Keywords

  • Anomaly Detection
  • Cryptocurrencies
  • Pump and Dump
  • Unsupervised Deep Learning

ASJC Scopus subject areas

  • Accounting
  • Information Systems
  • Information Systems and Management
  • Economics and Econometrics

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