Pump and Dump Schemes Won’t Make You Rich

During cryptocurrency bear markets there is an increased number of holders who attempt more volatile and risky moves to recuperate losses. Unfortunately, many of these quick alternatives can lead to even bigger losses for crypto holders. Pump and dump, or PnD schemes are among the most popular schemes that catch new and desperate holders. These schemes have evolved over the years and become progressively worse. This article will cover what PnD schemes are and why you should avoid them at all costs.

PnD is a scheme that manipulates the market to raise the price only for it to come back down as quickly as it ascended. This type of scheme has been around a lot longer than cryptocurrency and has been used by scammers in all types of markets. The idea is simple; get a lot of people to buy into an asset all at once and sell when the price is high. Unfortunately, the group that starts the pump will sell the asset before anyone else causing the rest of the holders to be stuck with an asset that is now worth a lot less.

In 2017, when the ICO boom was going on, there were a lot of groups that would use large sums of money to manipulate the market. Large buy orders combined with social media hype posts would get a project’s price to increase dramatically but only for a limited amount of time. Users would pour into these investments thinking the project was about to announce big news, only to find the price crash moments later and the value of their assets diminish.

PnD groups now operate in a much worse way than before using decentralized exchanges. The group will make Telegram and Discord full of fake users to make them look legitimate. They will then advertise massive gains from their previous pumps using images that cut off the prices and only show growth. The teams now make their own cryptocurrency, give themselves ownership of a majority of tokens and list the token on a decentralized exchange. They will then announce a huge pump coming and release the contract to their communities. The entire time users buy the token, the team will dump tokens. Teams use tactics like changing liquidity values to keep users stuck in these valueless tokens.

It is fairly easy to tell these schemes apart. Any group advertising massive growth and offering dates for when it will happen are obvious pump and dump schemes. Sometimes groups will call themselves trading groups and charge a fee to be a part of but ultimately they result in losses for subscribers.

The best course of action is to avoid anything that sounds too good to be true.

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Updated: 01/25/2022 — 06:00