How exactly to Spot Crypto Pump-and-Dump Schemes

How exactly to Spot Crypto Pump-and-Dump Schemes

Blog Article

Digital assets really are a frontier, and so it's no surprise they draw their share of outlaws.

When this story is shared on social media, inevitably a series of automated accounts, run by bots, will respond, share and retweet it to their followers, and in doing this, advertise numerous projects. While some of these projects will surely be above-board with varying prospects for success, others will undoubtedly be fraud or scams.

In the bewildering world of cryptocurrencies, where it looks like a new product or strategy launches every minute, it can be extremely difficult to tell the difference.

But based on Adam Carlton, CEO of Pink Panda, a utility token for a delicately designed digital wallet, there's one common scam that becomes very easy to acknowledge once we learn the signs: the pump-and-dump scheme.

The schemes

Pump-and-dump schemes exist through the investing universe, Carlton said, but due to the newness and popularity of digital assets, they're especially prevalent. In the scheme, holders of a low-value asset promote and “talk it up” to encourage others to buy and increase its price. When the purchase price reaches a particular point, the orchestrators of the scheme sell, take their profits and fade away before the cost drops, with later investors left holding the bag.

“You can find two types which are the absolute most prevalent right now. One is where insiders of the token are promoting it and stirring up all of the hype while on the backside, they're selling it slowly,” Carlton said. “Others target tokens and rally a group of that token community's members to get, which trigger algorithms, which trigger bots, who buy too, and whoever buys last and doesn't sell is left holding the bag.”

The very first type of scheme can occur in any sort of token, but the 2nd typically targets smaller, less well-known tokens, whose costs are simpler to pump up.

Click here to obtain more information about Crypto Pump Detector.

Report this page