What happened with Dogecoin? Pump & Dumping on Robin Hood retail traders.

If you’re new to crypto or have just been out of the loop, you’ll know Dogecoin is a meme coin that keeps pumping and dumping since at least 2014. Here’s a chart of Doge compared to BTC.

Now, if you saw this chart, you probably wouldn’t have bought, would you?

Each Dogecoin pump comes with some new narrative, but it’s the same few whales pumping and dumping each time (see: Wolong, admitted Dogecoin pump and dumper reveals all in “The Game of Deception”). The very first pump you see is from Dogecoin being featured on the Jamaican bobsled team. Now, it’s from Robin Hood locking people out of stocks so they turn their speculation frenzy to Dogecoin.

Here’s what I believe what happened to lead up to this pump.

November 28th, 2020: Dogecoin hits range low of 20 satoshis.

January 2nd 2021: DogecoinRise account created. This account is possibly run by the pumpers.

Week of January 25th: GME short squeeze pump & dump starts.

January 29th: Robin Hood and other brokers shut down GME buys along with some other stocks. Users now have an appetite for making quick money as they’ve just witnessed GME, NOK, AMC, KOSS and BB all return multiple hundred percent returns in a day.

January 28–29th: DOGE starts taking off. Most of the volume is on Binance exchange. The DogecoinRise account hits ~100K+ followers.

High profile “influencers” start sharing DOGE buy recommendations.

I was looking at the extreme volatility, and I saw some market inefficiencies.

I quickly saw that Binance had Dogecoin priced at 30% above Poloniex. So what would I do in this situation? I would profit if the two exchanges priced the Dogecoin at equal prices. I shorted a certain amount of Dogecoin on Binance and bought an equivalent amount of Dogecoin on Poloniex. This means if I wait long enough, it’s guaranteed profit as the prices will be equivalent one day.

Then, I noticed something.

Prices moving extremely fast on Binance, yet Poloniex and Bittrex (two smaller exchanges) had big sell orders on the orderbooks.

Unfortunately I can’t go back in time to show you the Poloniex and Bittrex orderbooks, but I can tell you there were at least 100 BTC of DOGE on the books at the time ($4million at least).

Binance disabled withdrawals the day after the pump, and Robinhood stopped crypto purchases temporarily.

The Dogecoin blockchain was having issues processing blocks, at times during the pump taking half an hour for the next block.

So, what is my conclusion?

I think the following happened:

  1. DOGE was largely accumulated in the past few months at dirt cheap prices as has been the case for 7 years now.
  2. Whales were looking for a way to get huge demand in for the coin — by running a Twitter campaign through their own accounts.
  3. GME, AMC, etc. short squeezes created a narrative of quick-and-easy money for Robinhood speculators.
  4. Dogecoin is on Robinhood. This offered a great opportunity for the whales to pay influencers some sum of money to promote Dogecoin. (I’m not directly accusing anyone of this but it seems very suspicious that they all shared very similar image and narrative a few hours in between)
  5. Influencers promoted Dogecoin and people started putting a ton of money into it.
  6. Whales removed all sell orders from Binance DOGE-USDT pair causing the price pump to be extremely easy.
  7. Robinhood likely buys their DOGE from Binance (just my speculation). The extremely fast influx of buys caused them to buy up the order book pushing price up very fast.
  8. Network is DDoS attacked — whales often control a large percentage of miners — to prevent transferring from one exchange to another.
  9. Opportunists like myself spot an opportunity in the difference in price between Binance and Poloniex, buying DOGE at a price I would have never otherwise bought at. (Not knowing that withdrawals are not working beforehand)
  10. Millions of dollars gets poured into the whales’ sell walls on exchanges like Bittrex and Poloniex; these buyers are expecting to be able to sell it on Binance at a higher price.
  11. After the price has pumped enough and there is enough exit liquidity for the whales on Binance, they start selling off hard on Binance and price crashes.
  12. The pump is over, everyone tries to claim they weren’t involved, DOGE goes into hiding for another “X” months until there’s the next opportunity again.

What do I think should be done about this?

  1. Cryptoassets that exist solely for pump and dump need to be delisted from all financial institutions. They are just moving money from honest people to fraudsters and serve no other purpose.
  2. SEC needs to show their hand and send a warning and/or actually prosecute the people promoting this pump and dump. It’s very clear an investment security when it’s promising returns and it serves no other purpose.
  3. People should be free to participate, but the promotion of securities that function as securitized Ponzi schemes with no future value generation need to be outlawed.

Interested in complex ideas