How Pump and Dump Scams Work in Crypto
The crypto world can be a goldmine for scammers, and pump and dump schemes are a common tactic. Here's how they manipulate the market to steal from unsuspecting investors:
Step 1: The Acquisition
Scammers identify a low-value cryptocurrency, ideally one with low trading volume (meaning not many people are buying or selling it). This makes it easier to move the price significantly. They then quietly accumulate a large amount of this coin.
Step 2: The Hype Machine
The scammers unleash their marketing magic. They might use social media, fake news articles, or pay influencers to spread positive rumors and excitement about this obscure coin. They'll create a sense of urgency, promising high returns and a chance to "get rich quick."
Step 3: The Pump
Fueled by the hype, new investors pile in, eager to jump on the bandwagon. As demand for the coin increases, the price starts to rise. This creates a positive feedback loop, attracting even more buyers.
Step 4: The Dump
Once the price reaches a peak the scammers predetermined, they unload their own holdings of the coin. This sudden surge in selling overwhelms the market, and the price plummets. The investors who bought in at the inflated price are left holding the bag – almost worthless coins.
The Aftermath
The scammers disappear with their profits, leaving a trail of disillusioned investors. The price of the manipulated coin continues to crash, often reaching its original value or even lower.
How to Avoid Pump and Dump Scams
Be wary of unrealistic gains: If something sounds too good to be true, it probably is.
Research before you invest: Don't just jump on the bandwagon. Learn about the project, its team, and its technology.
Beware of FOMO (Fear of Missing Out): Scammers thrive on this mentality. Don't rush into any investment.
Use reputable sources: Get your crypto news from established and trustworthy sources.
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