PUMP &DUMP SCHEME (BEWARE)
In times like this when Bitcoin and most altcoins take a bearish trend, one has to be cautious about Pump and Dump fraud schemes as the perpetrators feed on the social buzz and use as avenue to defraud prospective investors.
Should you fall victim to this fraud, speak with an expert at POLYGON DECIPHER ORG to conduct a sleuth operation against the fraud.
What is Pump and Dump?
Pump and dump is a method of exploiting the cryptocurrency markets by spreading false information about an asset, driving up its price (pumping), and then selling it (dumping). Because there is insufficient government oversight, it is particularly difficult to monitor this conduct in the crypto realm.
What Is the Process of Pump and Dump scheme?
A pump and dump scheme’s main goal is to artificially inflate the price of an asset (a cryptocurrency coin) and then to sell it off once the price has grown. As a result, the scheme’s creators can make money from the unexpected price hike.
This fake inflation is termed as a “pump”. The fraudsters make profits by selling those securities at an elevated price as quickly as possible, and this is termed as the “dump.”
Pump and dump schemes solely benefit the scheme’s organizers. Instant message (IM) apps like Telegram and other social media networks are frequently used to advertise these schemes. The new investors are probably going to lose a sizable amount of their wealth as the price of the security will unavoidably fall following the “dump,” while the immoral seller reaps gains.
The pump and dump program has been declared unlawful, as may be inferred rather clearly from the concept.
Why do people fall victim to pump & dump schemes? The major reason is
- FOMO.
“FOMO,” or the fear of missing out, is a reaction that occurs when a coin’s price increases. Pump and dump organizers entice traders by warning them that if they don’t invest in the coin, they will lose out on benefits. More merchants are drawn to the coin as more individuals start purchasing it and the price rises as a result. But as soon as the coin is put up for sale, the euphoria fades and the price starts to fall. Other traders suffer significant losses as a result. - Lack of regulation.
The absence of government regulation and the market’s global scope are the two elements that typically permit these schemes to take place. In the past, call centres were used to advertise pump and dump schemes, and the people behind them mainly used inaccurate or misleading information to persuade traders to buy stocks.
How to detect pump & dump schemes?
Knowing how to recognize a pump and dump scheme will help you avoid losing money. Although it can often be difficult to detect if you’re being conned, there are some warning signals that you should be aware of. Some of them are as follows:
When a coin’s price increases dramatically overnight without any news or event to explain it, that is one of the biggest indicators of a pump and dump scam. There’s a good probability it’s a pump and dump plan if you see that the price of a coin rises at the same time someone or a group is promoting it.
On websites like YouTube, Reddit, and Telegram, you can come across fabricated remarks, messages, or promotional postings from users regarding occasions relating to the coin they are advertising. The typical promise made in these blogs is that you will immediately quadruple your money. People who are participating in the pump and dump plan are using deceptive advertising in this case.
A low market cap coin is being pushed by scammers if it suddenly starts to appear everywhere on Facebook, Twitter, and YouTube.
General Conclusion
Firstly, I see no reason why one would just believe an investment tip from an unfamiliar individual you probably met on a social media app or via emails. Regardless, before one invests money or time anywhere, it is just right that due diligence is conducted by making adequate research and gaining as much knowledge about the program. Ignorance is a disease after all, don’t let it consume you!
