The Merkle recently received a tip about potentially dubious activity happening on one of the larger Cryptocurrency trading platforms: Poloniex. This particular instance surrounds a digital asset that many of you know I love, Dogecoin.
Wait, what happened?
Someone tipped The Merkle off about what seemed like insider trading, and linked a reddit post that was in /r/dogecoin. Frankly, the data does look weird, and we at The Merkle felt it worth following up on.
Screenshot Credit /u/randowwhistleblower
For those of you who may not be as familiar with a graph such as this, it is demonstrating Dogecoin’s performance between late May 27th and early May 29th. We can see a sharp incline in a short amount of time, followed by a large decline. As /u/randowwhistleblower pointed out in the previously linked post, this two day range tells a rather interesting tale, one that may be hard for many traders using this trading platform to swallow. It could be an instance of insider trading, or some other sort of collusion that was going on in an incredibly short window.
Is this really a controversy?
Well, maybe? At the time of writing this article, this post was positive 11 upvotes, but upvoted 99%, other commenters in this post were concerned that the post itself may be being suppressed to quiet the entire thing. In the comments, one individual mentioned how they thought the upvote/downvote numbers to be somewhat strange and mentioned this could be the work of bots to reduce the post’s exposure or hurt its credibility.
The evidence for upvote/downvote influence is hard to gauge, though 11 points being 99% upvoted is a bit strange of a upvote ratio. To be fair, a more active dogecoin community may have been responsible for burying this post without outside interference. As there were about 500 shibes on this subreddit while writing this article. Honestly, I think that the active community is more likely to have buried this with other posts, considering that new posts do not stay on the front page for too long at this point.
Transaction alignment to volume of Dogecoin
The top comment of this post points out that in the 30 minute span between blocks #1733190 and #1733219, 73 transactions collectively making up about 10 Billion doge (10% of all dogecoin’s supply) moved into smaller addresses. This could be an attempt to make it look like many traders wanted to do a big short on dogecoin, which would make values rise without sellers having anything to do with it. Allegedly in the TrollBox -a kind of chat function for the platform- there is also an instance where one user claimed they would be right back with “something big” prior to these enormous transactions. The timing on that alleged comment, the amount the exchanged addresses strikes me as just a bit too coincidental.
A note, not an accusation, and thoughts to consider
While I find some of these numbers and timing rather concerning, I cannot say for certain that there is anything overtly malicious happening here. The fact that almost 10% of all Dogecoin being moved into smaller addresses over such a short span is strange, but this does not mean it has to be “insider trading” or anything of that caliber. What it is exactly, I am unsure about.
Though what does concern me the most in all of this is seeing how someone, a group of people, or an exchange can influence the price of Dogecoin -and potentially any digital asset- so easily. If this time was not intentional and meaningful market manipulation, it is a demonstration of how someone or some organization with such intentions could manage to manipulate it.
Exchanges are necessary for the market so people can buy and trade their digital assets. However in a cryptoworld where there is no real regulation on trading and exchanges, I would much rather see crypto users and traders spread out a bit more so that exchanges are not in positions where they can host 10% of all an asset’s supply in the span of 30 minutes. If anything this is a wake up call for better decentralization.
Disclaimer: I am not a professional trader or professional market analyst, while the data here is weird I do not know that it constitutes anything nefarious.