Signs Of Bitcoin Pump and Dump Scams
Signs Of Bitcoin Pump and Dump Scams
As the craze for cryptocurrencies rages on, it is important to educate yourself first about them. This is applicable to any new groundbreaking technology. This is especially important where money is involved. That way, you can be sure that you understand where your money is going. More importantly, you will greatly reduce the risk of losing it entirely.
When investing in the world of cryptocurrencies, you need to be careful where you put your money. There are many scammers out there that are waiting to con you out of your money. It might be tempting to invest in something that promises great returns, but you need to be disciplined.
This article talks about a very common scam called bitcoin pump and dump scam.
Bitcoin Price History: A Quick Look
In 2011, bitcoin’s price started rising sharply, after crossing the $1 mark. In just over two years, it crossed the $1000 mark in December 2013. That was the first time when bitcoin got the limelight. More and more people started to buy bitcoin in hopes that it would rise further. However, the price crashed and the market entered a bear market phase.
In 2017, bitcoin again started doing what it was famous for. Parabolic price rises. It crossed the previous all-time high of $1000 and reached $20,000 by December 2017. This time bitcoin received even more attention and inflow of money. Many people thought that the price will simply keep rising. Again, the opposite happened. Once again a bear market phase started.
Currently, bitcoin is at $8,800 at the time of writing this and we have entered another bull market phase. Bitcoin is expected to get the entire world’s attention this time around. Therefore, it is important to stay informed to safeguard yourself.
What Is A Pump and Dump Scam?
A pump and dump scam is exactly what it sounds like. In fact, it has been around for as long as stock markets have existed. What happens is: a group of people buys huge amounts of a particular stock or in this case, cryptocurrency. The buying is done at once and in a planned manner. Their aggressive buying causes the price of that crypto to spike suddenly.
Seeing this, other uninformed investors rush to buy in as well. At this point, the group of people sells all of their holdings. This causes the price to plummet. The scammers make lots of profit but the late investors are stuck with huge losses. That’s why this scam is called “pump and dump”.
Many experts believe that bitcoin faced similar pumps and dumps too. It’s rapid rise and fall the last two times prove as much. Scammers even create their own pump and dump schemes that are indirectly based on bitcoin. They promise high returns that are tied to bitcoin and later dump their worthless schemes on the victims.
Bitcoin Not The Only Way
Bitcoin is not the only weapon that the scammers use. Some other cryptos are actually more preferred by them. In the world of cryptocurrency, these pump and dump scams usually happen in cryptos with lower market capitalization. That’s because trading volumes for these cryptos are usually very low. So, any significant amount of buying can easily inflate prices.
Also, investors fomo into buying these low-cap cryptos thinking they have achieved a breakthrough. This blind investing costs them dearly at the end. The scammers trap them and run away with lots of money. If it wasn’t clear by now, these pump and dump schemes are illegal. Governments literally have laws against them for traditional markets. They even apply in crypto markets as well.
How To Avoid Bitcoin Pump and Dump Scams
If you remain cautious, you can avoid these scams easily. As with anything in life, the first thing you have to do is educate yourself. This alone can prevent you from becoming a victim. The more you know, the less someone else can take advantage of you. Scammers usually target uninformed people who are easy targets.
It is also a good idea to read about all the common and ongoing scams. Awareness is key to avoiding any scams whatsoever. Also, do not go out of your way to indulge in risky investments. A combination of all these will help you stay safe.
Key Tips to Avoid Bitcoin Pump and Dump Scams
There are a few special tips that you should keep in mind to keep scams at bay. These are all actually common sense tips but it is worth reading them. That is especially because your hard-earned money might be at stake. The three tips are as follows:
1. Do Your Research
Any investment should be done after thorough research only. You should not base your decisions on a single person’s opinion or tip. After all, they might be biased or trying to trick you. There are tons of resources online that you can read to be more informed about what you are investing in.
2. Avoid Pump and Dump Groups
Even if you are given an opportunity to be on the side of the scammers, avoid it. You might feel like you can make a lot of money, but it can get highly dangerous. For one, it’s a bad thing to do, morally speaking. Second, it’s illegal and you can get in trouble. Third, you might be tricked and your money will be taken away.
3. Avoid Completely If It Sounds “Too Good”
We all have gut feelings that guide us in life. When something sounds too good to be true, it usually is. If you have a strong intention that someone is offering something too good, avoid it. Chances are, they want to scam you. Many people fall into the trap because of their greed. You need to be disciplined enough to not make the same mistake.
We you enjoyed reading “Signs Of Bitcoin Pump and Dump Scams” and gathered some tips to follow. You can also read: Easiest ways to buy Bitcoin, Regulations of cryptocurrency in Canada
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