Have you familiarized yourself with the basics of crypto, but remain unsure whether you are ready to try your hand at trading or investing? Are you apprehensive about making the jump into this evolving asset class because of concerns about crypto dumping? Have you heard horror stories about your peers losing big on crypto pump-and-dump schemes?
Hesitancy is understandable given crypto pump-and-dump schemes have become widespread. However, you mustn’t let fear of these schemes prevent you from capitalizing on legitimate, cryptocurrency investment opportunities.
Instead, you should learn how to spot crypto pump-and-dump schemes to protect yourself from them.
What is a Pump And Dump Scheme?
Crypto pump-and-dump schemes loosely resemble Ponzi schemes. The latter uses money from new investors to pay older investors. A few prolific Ponzi schemers include Charles Ponzi, Lou Pearlman and Bernie Madoff.
Pump-and-dump fraud tactics use a similar money-shuffling strategy. In these schemes, a handful of coordinated “investors” will begin buying a particular crypto coin.
Their investment will raise the asset’s price, encouraging unwitting investors to buy in as the price increases, pushing up the price even further. At a certain price point, the “pumpers” will dump their holdings and take profits. Their exit drives down the price, hard and fast, leaving those outside the inner circle holding onto assets now showing a loss.
While crypto pump-and-dump schemes have garnered…
