'Pump and Dumps' and Relex: Spotting the warning signs
Late last year I began to look for obscure cryptoassets to invest in. I believed, given the excessive valuations of the wider market, there was basically no token so bad that it could justify a cap of under $500k (with some caveats e.g. they needed a functioning dev team/no ponzi, pyramid schemes or other scams).
With a valuation of ~$100k, you can buy a large % of the total supply with minimal resources. This gives the potential for huge returns if one is successful. It also makes it of interest to people who seek to manipulate prices.
One of the projects I bought was Relex, a real estate focused cryptoasset which essentially acts as a fundraising platform for property construction. You would be able to buy into investment management companies (there are a number listed on the site) fund offerings using Relex. Objectively the value proposition was poor, there was scant proof around the team and the marketing materials were lacking. However, with a market cap of $100k it was worth putting a small amount of my portfolio in.
I initially ignored Relex’s rise last week– tokens with low trading liquidity are often susceptible to large trading swings and quickly return to normal. But it kept climbing. And climbing. It appreciated 10,000% from my original buy-in at its peak (although my sell points were far lower than this) and jumped 1,900% in one day alone.
There is a temptation to ascribe success to your own intellect but the speed and scale of RLX’s movement could not be ignored. I did very little research at the time of purchase (essentially none). If I had, what I will outline would have been immediately obvious. With the market cap now at a much higher c. $5m this should serve as somewhat of a warning to those thinking of investing either in Relex or a similarly structured project.
This article contains no smoking gun and no proof of a group that sought to manipulate the price of Relex. I am simply going to outline the state of Relex, the issues that would hypothetically make it a perfect target should someone have wanted to manipulate the price OR made it a prime candidate for a pump and dump even if no-one was seeking to deliberately manipulate it. I am also going to review what I believe are team transactions, showing that team/partner accounts are more than likely sending RLX to exchanges in large quantities.
I began writing this article last Friday, but due to other commitments have not been able to complete until today. Therefore, the data in the attached Sheets document is slightly outdated and my notes somewhat confused (rather than giving dates I have unhelpfully written comments such as ‘4 days ago’). You can track the addresses through etherscan to matchup my comments with the blockchain to verify what I have written. I have included links throughout the piece of transactions – there are hundreds more I could have included, but I do not feel they would add much to the piece as the pattern is fairly obvious.
Concentration of token supply
One of the most useful aspects of etherscan and ethplorer is the ability to see the list of token holders at a glance. When I first bought into Relex there were c. 200 addresses, so at an absolute maximum there were 200 people worldwide who owned RLX (as I will come onto later, I suspect it was far fewer). There are now 322, reflecting the uptick of interest from new investors drawn to the outsized returns RLX has provided in the last 7 days.
One of the key metrics is always the proportion held by the largest accounts. This will always be a large amount given usual wealth distribution.
Relex, however, has a much higher proportion than usual.
Excluding Account 1 (the team’s main account which should not be in the circulating supply), there are c. 764000000 tokens in the circulating supply. Of these, 726000000 are held by the top 49 accounts, some 95%. A concentrated token supply means that if you are buying in later (and particularly after a large price rise like this) you are at the mercy of these large accounts.
In the last 24 hours there has been 108 ETH traded in RLX on IDEX, c. 5m RLX. That 5m RLX would have cost someone who bought just 30-60 days ago less than 2 ETH. A normal user who has just made 106 ETH (roughly $75,000 at the time of posting) is less price sensitive to just marketing selling than someone who has come in at current prices. Even if they force the price down to half the current price, they would still have made $37.5k off a $1k investment.
These large accounts therefore have huge power. They can move the price of RLX at will – up or down. DEX’s such as EtherDelta with its lack of order matching (you choose the order you wish to fulfil manually – it does not have to be the best priced ask or bid) make it easy to either buy or sell from yourself and therefore ‘spoof’ orders and trading volume.
The biggest worry with this power is not necessarily they will deliberately aim to manipulate however, it is that they will simply act according to rational behaviour. It takes a very brave person not to take any profits after seeing a 5-10,000% increase. If someone has 5m RLX, they may wish to sell half quickly in case they themselves believe it is a pump and dump (remember, pump and dumps are usually organised by a very small number of people) – but this would be half of the entire volume for today. These individuals therefore have huge power over the price movement.
Relex team activity
If the top 50 was mainly comprised of individuals you could have a bit more confidence in the price to move fairly normally. Large pumps in crypto are not uncommon and many hold/keep going up (look at the rapid growth of Raiblocks/Nano at the tail end of 2017).
I do not believe Relex to fit this mould.
Looking through the top 50 account holders, I have labelled 15 accounts as looking like personal accounts. I have labelled another eight as TBD, looking like personal accounts but which have certain shared traits with other accounts. There are three which I believe are exchanges – Account 4 is EtherDelta, Account 14 is IDEX and I believe Account 23 to be Stocks.Exchange (although I am not 100% on that). You can find this information here.
This leaves 24 accounts out of the top 50 which I suspect are either Relex or Relex partner accounts. I have outlined brief thoughts as to why in the referenced sheet. Some comments may seem arbitrary, but once you start going through them you spot patterns which highlight similarities between them.
If correct, this leaves the team/partners in control of 76.75% of the total circulating supply – a staggering amount. Including Account 1, supposedly not in circulation, this would leave c. 87.5% of the total supply in their hands. Why do I say ‘supposedly’? Because the account is constantly moving tokens out into new accounts.
7 days ago, before an airdrop as a bonus to existing investors (which could be excused), the main account sent 10m to an account. From there, 5m were sent to EtherDelta, then another 1m, then 300k to IDEX, then a further 200,000. Within the last hour, 20m RLX were moved to a new account.
There is enough proof to be confident that the team have been trading some of their tokens owing to the movements of RLX between suspected team ones.
This achieves two things:
- If the team is not trading/using their tokens then it dramatically reduces the ‘true’ circulating supply and would therefore push prices up
- If the team is trading then it leaves them in complete control of price movement. They know the information before normal investors, they control the supply. If trading then the team is essentially the price arbiter
It is worth noting at this point that Relex did not do an ICO. They did not raise user funds. There is legally nothing wrong with them trading (as far as I’m aware) and I suspect their argument would be that for the project to succeed they need investor liquidity. Regardless of intentions, it is an important point for investors because you are at an inherent disadvantage. And it is not just the main Relex account sending RLX to exchanges.
For example, Account 12 (0xea14b068f3cce61899fb2ab8a565bb8c37b576fb) received 40m in RLX at the start and has sent 16m in two transactions to this account which then swiftly sent 1m RLX to IDEX. 11 and 46 days ago this same account sent 10m and 6m RLX to Account 21. Account 21 then sent 6m to EtherDelta 46 days ago and just an hour ago sent two lots of 2m to a new account (movements such as these are why I believe the 300+ token holders is an inflated figure).
Account 2 received 279m RLX at the outset. Since then it has seen a steady stream of outgoings, except for another 100m injection from Account 1 fifteen days ago (it’s a good thing Relex isn’t listed on CoinMarketCap or they’d be busy constantly updating the circulating supply). There are so many outgoing transactions from Account 2 that ultimately end up on an exchange that it is futile to list them all. I will list a couple to prove the point.
For starters, there are two 10m transactions direct to EtherDelta 15 days ago. Account 2 sent 40m across three transactions (20m, 10m, 10m) to this now dormant account. This account sent 17 transactions to EtherDelta over a period of months for a total of 79m RLX (you can Ctrl+F for ‘0x8d12a197cb00d4747a1fe03395095ce2a5cc6819’ to see all transactions to EtherDelta) as well as 5m to IDEX. It also recouped 12.8m back from EtherDelta.
This account also then sent 5m to Account 32. Guess where Account 32 has been sending RLX to recently? You guessed it, 6m to EtherDelta in the last week comprising two transactions of 5m and 1m. And for full marks, can you guess which account sent Account 32 10m RLX just before it sent those RLX to ED? That’s right! Account 1, the main team account that they state is not in active circulation, sent across 10m RLX the hour before those 5m referenced above were sent to EtherDelta.
I could keep going through every account I have listed, but hopefully the point is obvious. There are other discrepancies e.g. Account 22 received two airdrops for differing amounts (the only account I saw receiving two airdrops) and has coincidentally just sent all of its RLX to other addresses, including 6m to IDEX just recently. Account 22 received its initial 24m from Account 2 and sent 7m to another account which immediately turned around and sent the entire amount to IDEX 2 days ago (these connections are why it is listed as a team account rather than a personal one which at first glance it looks like given it has other tokens/activity).
I do not have any proof that Relex is a scam - but this is not what this article is about and it is almost irrelevant purely from a trading perspective. They did not do an ICO and they may be legitimately selling off tokens to fund their operations (information is hard to come by). I have seen their invitations to the Yalta conference, their application to be SEC approved, their connections with Woodfine Capital Projects etc.
It could also simply be the price reacting to the arbitrage potential - as you can use RLX to invest in the real estate opportunities listed on their website, RLX was clearly undervalued if legitimate. Each LP unit in a Woodfine Capital Projects opportunity is equal to $100. Each LP unit costs 35,000 RLX. At present, 35,000 RLX would cost $532 (at a current price of $0.0152). However, 35,000 RLX just a fortnight ago would have cost just $5. It could well be a project that is all above-board and ends up being a massive success. I am sure most of what I say will therefore be written off as nothing more than FUD by the Relex community but really this article is less about the specifics of this project and more about being aware of potential dangerous situations.
If you care about protecting your capital (and you should – risk management is the single most important thing you can practice, especially in the volatile world of crypto) then be aware you are dicing with death if you decide to trade a token such as RLX:
- Team accounts are moving RLX to exchanges
- They are moving tokens from what is supposedly an account not including in the circulating supply to other team accounts which ultimately are then moved to exchanges
- The majority of tokens are in their hands
- The tokens not in their hands are controlled by a narrow set of people who bought at prices 100x lower than they are currently
- It fits the exact template of a pump and dump, with little to no volume for months, a huge runup in price and a resulting substantial increase in volume
Even if there is no ill intent, you are at the mercy of these parties as to how high or low the price will go. It is a precarious position for an investor to be. Given the supply is so narrowly controlled, it could easily inflate 20-50x further from here. It could equally sink back to its previous anonymity.
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Disclaimer: I do not hold RLX but have held in the past.