Not all the coins in the crypto world are designed to enrich investors, but are designed to deceive investors. A pump-and-dump scheme is one of the most widespread tricks, and it has made numerous individuals including myself, a Nigerian crypto lover, to lose money. It is so quick such that without care; one can be buying high and can see the money gone in minutes.
A pump-and-dump scheme typically starts with hype. The promotion of a low-value altcoin begins to be done by a group of people or influencers, making it seem like the next big thing. They distribute their attention on social media such as Telegram, Twitter, or Tik Tok.
The more individuals purchase the coin, the harder the price starts increasing sharply, this is the pump. In case of a high price they sell their stake at a massive profit when the price reaches a peak. Then the price falls, and the common investor is left with the coins that are insignificant. That is the “dump.”
Most individuals get into these scams since they do not know how well they are planned. The individuals behind them usually have big sums of the coin prior to the commencement of the pump. They generate artificial hype and even their bots to create an illusion of actual demand.
The investors who become afraid of not being able to receive a reward rush in at the last moment - they are so-called FOMO ( Fear of Missing Out ). It is a sad thing because most of the time they buy when it is too late.
In order to defend yourself, you need to know how to identify the red flags. When the coin does not seem to have some obvious purpose, no effective development team, and all it gets is the hype of social media, it is probably a pump-and-dump.
Moreover, when the price is rising too quickly with no actual news or collaborations, then that is a warning. Never invest without researching a project and never buy it because everybody is talking about it.
Personally, the best defence mechanisms in the crypto market are patience and research. Authentic investments are slow to develop whereas frauds are fast and emotional. Knowing about pump-and-dump schemes will allow you to stop incurring painful losses and concentrate on coins that have value in it not empty promises.
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