The Rise of Crypto Pump and Dumps
The rise of cryptocurrency has been a fascinating to watch as most of us have been locked in our houses starting in 2020. Sounds like everyone and their cousin has some sort of take on cryptocurrency and some have YOLO’d savings into it. So to be that uncle at the thanksgiving table, why are pump and dumps on the rise?
So what is a pump and dump? In short manipulating a stock by hyping it up via recommendations which artificially increases the price then selling before the stock drops. This is a huge scam as several others out of the “know” could invest into the stock and lose money unknowingly a massive drop is in the future. Several other consequences can come of it as well, but that’s the general idea.
Note: The huge GME to the moon movement could fall under this category however you’d have to prove that every person investing into the stock believed it would drop, and well it really hasn’t dropped back below a 100 for a bit.
So that’s illegal why do we such a rise in crypto scams now? Several new currencies and tokens can be spun up quickly. If you have a introductory knowledge of programming, git, and deploying it out. Hell, even companies will do that all for you for a fee.
Another note of cryptocurrencies aren’t backed by the government and are now just getting some look at regulation for it. However it’s more of a wild west in terms of currency with the theme around “decentralization”. If you don’t understand decentralization all it means is no single organization has control, the control is spread out amongst everyone invested.
Finally, bitcoins usage originally is unbelievably questionable with what can be purchased with it such as drugs, hitman (probably a cop), and etc. The Silk Road
Now we have the following 3 variables:
- Ease of access (new coins easily created)
- No real regulation
- No single entity has ownership (some exceptions in terms of giving portions out before release to the public)
So naturally scams are going to spin up like crazy. The amount of influence individuals have the Internet with no real intentions with sticking with the project usually ends in these pump and dumps that wrap in within the first week of the project. The main components are advertising through social media networks to get consumer interest and hype on launch. The big thing is about getting as much early on in hype and promising millions while the only promise is to yourself.
This is a pretty ugly move by a individual to do this and should be held to the same expectations of a stock. The fact “you aren’t a financial advisor” doesn’t exclude you from the fact that this is money being taken with the knowledge that’ll you will profit heavily from it while the rest lose out. I’m kind of sick of the same sorry excuses that people come up with, refund the money and go on if the project fails.
Anyways the rise is pretty obvious, I’d stay away from heavily advertised tokens. If you have to explain to everyone it’s not a scam you might need to reflect on yourself.
Thanks for the read!