Speaker
Description
The first cryptocurrency ever was Bitcoin, which was described in a white paper in 2008: Bitcoin: A Peer-to-Peer Electronic Cash System, edited by Satoshi Nakamoto. From 2008 to the present, there are approximately 10,000 crypto assets worth about $1.15 trillion. It seems that crypto-assets have become part of the financial culture.
The EU is one of the first which adopted comprehensive regulation of crypto-asset markets in May 2023. Article 91 of Regulation (EU) 2023/1114 of the European Parliament and of the Council on markets in crypto-assets is of particular interest: Prohibition of market manipulations, where manipulation occurs when misleading or false signals are given or the price of one or more crypto-assets is maintained at an abnormal or artificial level.
How can we detect market manipulations with crypto-assets? One possible way is to discover outliers. Detecting outliers has been a topic in statistics for centuries. In the last two decades, interest in methods for detecting outliers has increased particularly in the data mining community. Thus, there are different approaches to outliers in the literature depending on the research field and area.
In this research, Benford's Law will be used, which is based on the expected distributions of the first digits of the observed numbers. Benford’s Law is one of the best-known preliminary methods for detecting collective outliers in the field of forensics. Research on the application of Benford’s Law in the field of crypto-assets is ongoing. In this research, two of the most common market manipulation techniques with crypto-assets, “pump and dump” and “wash trading”, are presented. The market manipulations with crypto-assets discovered by Benford’s Law will be analysed. The research results can be used as a preliminary approach to detect suspicious financial transactions in order to protect investors, prevent the misuse of crypto-assets, and maintain market integrity.
