Cryptocurrency markets are flooded with pump-and-dump schemes. These types of schemes are generally considered illegal by most popular exchanged. They also result in unsuspecting investors losing their assets. Even the bitcoin can get pumped if the right people are on the job.
How these cryptocurrency pumps work.
These pumps are usually orchestrated through the use of the messenger app, Telegram. The schemes initially start by boosting the price of a specific cryptocurrency. While a select group of buyers executes buy orders at the right time.
Once the price goes up by a substantial amount, unknowing investors buy in during the peak rise. But at that point, it’s too late to make a profit and investors get dumped on by the pumpers. Leaving with most of the artificially created profits. Investors are left at a loss.
You may be wondering how something like this can actually go down. It’s important to remember that for the most part, the cryptocurrency industry and exchanges like Bittrex, aren’t heavily regulated. Kind of begs the question as to why exchanges don’t push for more regulations. Shouldn’t they care more about investor assets? Oh well, let’s leave that topic for another time.
Massive amounts of funds have been raised through pump and dump schemes. Though, contrary to the digital crypto market. Pumps and dumps are extremely illegal in places like the New York stock exchange.
So, we can assume that it’s a matter of time until government bodies start targeting exchanges and groups more heavily.
Most of the crypto community knows about these groups.
There are a ton of groups designed specifically for pumps in Telegram. Some have even thousands of members in them. Some even have V.I.P members that allow for quicker access to upcoming pumps.
And here’s an example, courtesy of Business Insider as to how these pumps are orchestrated exactly.
Yeah, be sure that regulations and legal punishment will soon be about us. The entire cryptocurrency markets capitalization has reached $300 billion. Which is too big to be ignored.
To wrap things up.
It’s impossible to know when these pumps happen if you aren’t in the loop. And, there are no concrete statistics to really go by. It’s also not so easy to catch the people involved. Telegram can be used anonymously, so a lot of these guys will go unpunished. Many of them don’t think that there’s anything wrong.
Well, they are half right about that. Investors do need to watch their backs and do as much research as they can before they invest in a given cryptocurrency.