The cryptocurrency market is highly susceptible to “pump and dump” scams. With regulatory uncertainty and enforcement difficulties, thinly traded cryptocurrencies are prime targets for scammers. Understanding how these scams work, why the cryptocurrency market is vulnerable to them, and how to spot them will help you avoid falling victim to these schemes. $BTC

What is a pump and dump?

Pump and dump scams date back to the early days of the stock market. The idea is simple: a person or group of people buy a poorly traded asset, such as a penny stock, when its price is low. They then start spreading positive news about the asset. Often, this news is completely fabricated.

As investors become more interested and buy more of the asset, the price continues to rise. Once the price reaches a certain level (the “pump” phase), the scammers sell their stake to new buyers. Since they own a large percentage of the asset, their selling causes the price to suddenly collapse, leaving other investors with significant losses.

Why is the cryptocurrency market vulnerable to pump and dump? The cryptocurrency industry is considered the “Wild West,” with many platforms and it being relatively easy to issue a new cryptocurrency.This creates a fertile environment for weakly traded currencies,