The cryptocurrency market, although full of opportunities, is also plagued by fraudulent schemes. Two of the most common are the "Pump & Dump" and the "Rug Pull."
What are Pump & Dump and Rug Pull in Crypto?
El "Pump & Dump
It is a scheme where scammers artificially inflate the price of a cryptocurrency by spreading false or misleading information. That's how it works:
Initial Purchase: Scammers purchase large amounts of a low-value cryptocurrency.
Fake Promotion: They use social networks, forums and other channels to spread rumors and fake news, generating a buying frenzy.
Mass Selling: Once the price has risen significantly (the "pump"), scammers sell all their holdings (the "dump"), making huge profits and leaving new investors with losses when the price drops.
Rug Pull
“Rug Pull” is another scheme where the developers of a cryptocurrency project suddenly abandon the project and take the invested funds with them. That's how it works:
Project Launch: Developers create a new token or project, promising great returns or innovations.
Investor Attraction: They aggressively promote the project to attract investors and increase the value of the token.
Abandonment: Suddenly, the developers withdraw all funds from the project and disappear, leaving investors with worthless tokens.
$PEPE Pepe, big scam, like any new and popular crypto, is susceptible to these schemes. Here is how it fits perfectly into these types of frauds, let's analyze:
1Pump & Dump: Whales (large holders of Pepe Coin) could inflate the price through a false promotion. By stimulating the market and causing large purchases, they can sell their holdings at high prices and then disappear, causing the price to fall dramatically.
2Rug Pull: If Pepe Coin was created by (anonymous) developers with malicious intent, they could attract massive investments and then withdraw all funds, leaving investors with worthless tokens.
Many example questions are generated:
Why does Binance list these types of coins? Without going too far, the Luna #LUNA/UST project (listed by Binance) which had strong fundamentals was part of these schemes, imagine the risks of this meme not backed by anyone, nor a project, these schemes in recent years They scammed a large part of enthusiasts with little knowledge of the misnamed Shitcoin, even the exchanges warn you of the risk, it is just a matter of days, hours 🕒 until those behind it decide to take a profit and the rest is history.
Conclusion
It is always crucial to thoroughly research any cryptocurrency before investing. “Pump & Dump” and “Rug Pull” schemes are real risks in the world of cryptocurrencies.
These concepts will hopefully help financial education for enthusiasts and retailers, who are the majority.
Remember that we are more dominated by ignorance than by force.
SB.
