Even though digital coins and blockchain technology are relatively new, they are nevertheless vulnerable to the same types of scams that have plagued the industry for years. Pump and dump schemes are one of these schemes.
On regulated crypto exchanges, pump and dump schemes get prohibited. Users are sure that they will not get readily caught by authorities. The unregulated crypto industry has given fertile ground for fraud.
Pump and dump schemes in cryptocurrency refer to situations for an individual or group that intends to benefit by pumping an asset into the market. The phrase “pumping” refers to the purchase of large quantities of coins to increase demand and raise the price of a particular currency.
The assets are then released at a higher price to generate a high return on investment. Scammers take advantage of supply and demand market dynamics to persuade investors that price fluctuations are a normal part of life.
Scammers frequently target new and unpopular coins that are easy to manipulate and do not cost a lot of money. Scammers, for example, would rarely consider using Bitcoin pump and dump to induce a bullish run because it would take a large sum of money.
Scammers also initial coin offerings (ICOs) to make more money from the pump and dump schemes since many investors are psychologically prepared to purchase. The ICO get preceded by intense lobbying to present the pumped asset positively.
A crew of tech-savvy, motivated, and well-organized gamers is at the heart of pump-and-dump systems. These players work from various angles to make the publicity appear normal.
Investors get frequently included in the team, who give funds to purchase tokens and increase demand. If the chosen is a low-volume asset, scammers can control the supply and set the price by buying a large number of them.
The team gets focused on artificially inflating supply. Another expert is working hard to show the tokens’ positive side. Scammers used to entice individuals to buy dump and pump stocks by word of mouth.
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