The expectation of obtaining great returns within the P2P market can easily be broken by the scheme Pump and Dump. A large network of scammers in the Crypto world which is looking for more opportunities for malicious purposes.
Unfortunately, this nefarious system is not new, as it has been brewing in the stock market and later spreading to Cryptocurrencies. This leads to severe losses for expert traders, enthusiasts and investors.
So how do you identify and prepare for this ploy? Do not be a victim of deception and protect your investment. Find out all about it and learn the smartest ways to avoid fraud.
The Pump and Dump through history
Pump and Dump has its roots in Wall Street. This dates from the 20th century from the investment boom in the stock market, taking advantage of the investors.
Click to tweet: The Pump and Dump has its origins on Wall Street, where a group of bankers devised a sophisticated plan to fraudulently capitalize shares.
Basically, the plan came from a small group of bankers, who massively bought up the shares of small companies. The idea was to wait for its growth until trading at extra high prices.
Then, using the media, they seduced the masses with promises of high profits, in order to attract many investors.
Top executives created artificial inflation of stocks and then withdrew, while investors lost their invested money. A real stock scam!
The most emblematic and historical case of Pump and Dump was Enron, an energy corporation, whose directors implemented this scheme.
After inflating the profits, the accounting was altered and they proceeded to sell million-dollar shares before the company went bankrupt. But what about the world of cryptocurrencies?
With the introduction of technology, this practice has spread to the Crypto universe. SSRN (Social Science Research Network) analysts noticed thousands of Pump and Dump groups on instant messaging platforms.
The operation consists of promoting little or nothing known tokens; low volume cryptocurrencies without the need for large investments. Offer false growth opportunities, taking advantage of the lack of market regulation.
How do Pump and Dump risk the cryptocurrency market?
The Pump and Dump represent a potential negative factor by giving little credibility and reliability to the cryptocurrency market.
Despite being a decentralized system, does not mean that the crypto world is a scam. The point lies in the manipulators who take advantage of the ease of transactions for fraudulent purposes. Therefore, it is worth informing yourself to strengthen your knowledge.
Recommendations to avoid falling into a Pump and Dump
It is essential to pay attention to expert advice to avoid being deceived. Check out these helpful tips for your safety.
Avoid investing in cryptocurrencies for tips or ads on networks
Currently, the Crypto market is well established. There are great professionals with experience, willing to lead you on the right path in your investment.
Click to tweet: To protect your assets from possible fraud with a Pump and Dump, it is necessary to avoid investing in cryptos through tips or advertisements on networks.
Ditch the idea of handing over your money based on social media ads or echoing rumors. Make investments only when you are sure of them.
Do not trust advertisements promising quick profits
There is no glory without effort and no gain comes from nothing. Cryptocurrencies do not escape this reality; deceptive advertisements with promises of high investment returns, surely are Pump and Dump.
Ignore false speculations where you are guaranteed zero loss levels
In the P2P marketplace, as in any other, there are always risks. Not admitting it or telling you otherwise is a sign that you may be dealing with fraud.
How to identify a Pump and Dump?
Here you will learn to recognize the scam network, who are usually the first to enter Cryptocurrency trading.
- There is a reputable ringleader who invests in low-level coins, investing very little in them
It can be a very popular person or group with a large following. The Pump and Dump strategy is to invest a minimum capital in cryptocurrencies of little value to increase its price.
- The ringleader invests massively in the low-value coin to try to raise its value
The scammer buys continuously, raising the price and starts promoting it on channels like Telegram, Whatsapp, YouTube, etc.
- It incentivizes other groups to invest in the low-value cryptocurrency. This group will perform the Pump and Dump
All those groups of traders and investors, encouraged by the idea of making a profit, allow themselves to be manipulated and buy the tokens. In addition, these investors help spread false information.
- These leaders unexpectedly disappear with the investors’ money
When the ringleader has ripped off enough, he decides to sell the Cryptocurrencies. A domino effect occurs, where each group begins to sell and, therefore, the price falls. This mostly affects the last groups, who lose their money.
The Pump and Dump is an old strategy, unfortunately updated, thanks to the use of technology. It only requires a few hours, during which an increase of up to 500% in the price of Cryptocurrencies is observed.
This Crypto hoax records at least 2 scams per day, with estimated losses of more than $6 million per day. Therefore, you must have a secure platform that guards your assets and avoids fraud associated with your exchange.
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