HOW EXACTLY TO SPOT CRYPTO PUMP-AND-DUMP SCHEMES

How exactly to Spot Crypto Pump-and-Dump Schemes

How exactly to Spot Crypto Pump-and-Dump Schemes

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

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

In the bewildering world of cryptocurrencies, where it seems like a new service or strategy launches every minute, it can be quite difficult to inform the difference.

But according to Adam Carlton, CEO of Pink Panda, an electricity token for a delicately designed digital wallet, there's one common scam that becomes quite simple to acknowledge as 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 cost reaches a specific point, the orchestrators of the scheme sell, take their profits and fade away before the price drops, with later investors left holding the bag.

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

The first kind of scheme can happen in any kind of token, but the 2nd typically targets smaller, less well-known tokens, whose costs are better to pump up.

For more details please visit Crypto Pump Detector.

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