Evidence of Price Manipulation in Chainlink (LINK); Crypto Pump and Dump Scam or Coinbase Effect?


  • Pump and dump scam or Coinbase effect
  • Artificial market manipulation: small number of addresses accounting for a hugely disproportionate transaction volume over a short period of time

The top performing asset of 2019, with about 493% gains is Chainlink (LINK). The 20th largest cryptocurrency with a market cap of $623 million started 2019 at $0.30 and climbed to its all-time high (ATH) in June at $4.36.

At the time of writing, LINK has been trading at $1.79 with 24 hours loss of 0.15% as per Coincodex.

However, according to the latest reports, the spike in its price might not be all organic.

The trading pattern of Link suggested a pump and dump scam, discovered AnChain.ai, blockchain transactions analytics company. However, the firm didn’t offer any evidence to who is manipulating the price of the cryptocurrency while the company behind LINK denied having any role in the alleged pump-and-dump.

Artificial Market Manipulation

In pump and dump schemes, the price of an asset — often that of an asset with a low market cap and trading volume cryptocurrency — is manipulated by a group of actors that artificially inflate demand by making a series of high-volume buy bids.

This inflated demand then triggers an increase in price. Once the price dramatically rises, the scammers dump their digital currencies. As such, flooding the market with heightened supply pushes the prices lower.

Small market cap currencies are more prone to these scams as they are concentrated in the hands of a small number of investors. When it comes to large cap cryptocurrencies, whales are the ones that moves the price in similar fashion.

Victor Fang, CEO of AnChain.ai said:

“We are confident that our research is illustrative of artificial market manipulation as it involves a small number of addresses accounting for a hugely disproportionate transaction volume over a short period of time, and that these transactions were subject to various forms of obfuscation and concealment atypical of legitimate market activity.”

Pump and Dump or Coinbase Effect?

The firm studied the trading data of the crypto asset from April 1 through July 26, 2019, when there were 111,858 transactions out of which 110,947 were successfully confirmed. Starting June 28, the price of LINK jumped, driven by a small number of trades.

AnChain.ai found that there were attempts to hide the trading activity.

A single address sold 4.2 million tokens from July 2 to July 15 and the user had multiple “jump addresses.”

However, this could be the result of Link’s listing on Coinbase in June.

But the firm didn’t not any possible impact of this in its report and said the pump and dump appears to precede Link’s Coinbase debut.

Moreover, in 2019, the Coinbase effect was missing as seen with XRP.

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