Crypto pump-and-dumps are when people (conspirators) use misleading information to raise the price of a cryptocurrency so they can sell it and profit from there.
It’s also explained as a coin’s founders, collaborators, or a group of traders spreading misleading information to inflate the price of an asset before selling the shares for a higher price.
It mostly happens when there’s not plenty of information to crypto buyers.
For example, Squid game crypto soared in value. The creators of Squid game crypto inflated its coin. Then, they disappeared with $3 million in their pockets from investors.
Another example happened with Kim Kardashian and Floyd Mayweather Jr. They pumped the price of EthereumMax. After their actions, company executives took the profits and lefts the investors with worthless crypto.
Investors filed a class-action lawsuit in January accusing Kardashian and Mayweather as part of the scam.
How to Avoid Crypto Scams?
In a non-regulated market, it is easy to fall for scams. However, we present you with information written by Adam Levy to combat it.
-If you see a relatively unknown cryptocurrency being touted by internet strangers, don’t rush to get in. Look up the token, find its white paper, and read through it.
You should do this for any cryptocurrency to determine if there’s long-term potential for it to increase in value.
-If the project has no clear purpose, it purports benefits that seem unrealistic, its development roadmap isn’t well thought out, or it’s associated with previous bad actors, those are all red flags, too.
-If all of a sudden the people you follow are talking about a cryptocurrency, that’s another big red flag.
-Most exchanges will show you all the open orders for an asset, as well as the order history. Check the pattern on trading volume.
If it’s spiked recently and volume appears to be trending higher, be cautious.