What is the Pump and Dump scheme in Cryptocurrencies? Completely Explained!
Crypto trading may be very difficult for many users to continue, its protocols and rules are not very easy to be understood by a newbie, and also the internet boom leaves no room to solve many queries about digital finance and trading to go hand in hand. It is like, we had heard many things about cryptocurrencies but then new things popped up in the market the next day, new exchange, new governance tokens, as the internet age is an age of transformation many updated rules and schemes become unfamiliar to the people. So, to solve the problem, we research hard to get the juicy results for our readers to get inside, here we have come across such a scam scheme that can either break or make any crypto trading!
What is a Pump and Dump Scheme?
Pump and Dump Scheme is like spreading the false narrative about something to create its brand value, you can understand it better in this way. Let’s say there is an upcoming election and to garner the vote, a scheme called pump and dump was run. If you are interested in bitcoin trading visit this link to know the increasing participation of women in blockchain sectors .
The political groups elected one unfit leader who isn’t capable of bearing the public interest, but to win the election, many good things and fake promises were spread to the public to ensure its winning percentage.
The same thing happens in the Crypto world, a person buys an asset at a very low price such as penny stock and starts spreading false news about the asset, now as more people start believing in that news, a big investment group is created which raises the price of that asset.
Now the person who had bought the asset at a low price sells his shares at a high price leading to a price crash in the market.
How do Pump and Dump Schemes Work?
The Pump and Dump Scheme is an illegal fraud that is an explicit way to make a huge profit by creating misconceptions among the public, and the rise in the monetary value of the asset is called pumping while a fall in price is called dumping.
Here are the reasons how the Pump and Dump scheme is operated in the market.
· Availability of lots of Digital Exchanges
Now as there are lots of crypto exchanges available in the market, hence it becomes easier to facilitate a new cryptocurrency in the market.
· Targeted buying of a certain crypto asset
After a targeted crypto asset is selected, a confirmed group of pump and dump schemes buy the asset in larger quantities and spread false news about its brand value.
· Easy creation of thinly traded crypto asset
Everyone can create a new crypto asset, all it takes is a little knowledge of coding and small research, these two things simply coordinate the pitching of thinly traded assets in the market.
· Unregulated Crypto asset
As no deep research is done about these thinly traded assets, they come unaudited and no regulation is applied over their sale, people only make wild guesses and assumptions about their future growth and [profitable returns.
Find a Pump and Dump Scam in Crypto
· Checking out its Development RoadMap
If a digital Project is going on, check out its development roadmap and see if it has got any red flags, check about its investment details and certified exchange, and if there aren’t any it is better to avoid it.
· Checking its trading Volume Pattern
You can also check the trading volume pattern based on the graphs and order history, beware of newly launched token and low volume type assets.