Cryptocurrency enthusiasts see Bitcoin, Ethereum, and Dogecoin to be the future of money around the world. Crypto works by using blockchain technology to create a digital ledger that records transactions. You can also ensure your technical support using blockchain integration services. This would make it a more secure form of currency. Scammers can be found anywhere there is money.
The crypto pump-and-dump scheme is designed to exploit people and make big money for fraudsters. These schemes involve influential people who are paid financial incentives to convince people to purchase a particular digital coin to increase its value. The scammers and influencers make a profit by selling their coins, while the rest of the investors see their investments fall in value.
These schemes are the latest twist in the story of cryptocurrency, which has created some millionaires and bankrupted others due to their constant volatility. Dogecoin, which was originally created as a joke, has gained mainstream attention due to Elon Musk, Tesla CEO, who stated at last week’s B conference that he “pumps but doesn’t dump”.
He’s not alone.
Earlier this month, popular esports organization FaZe Clan suspended multiple members who participated in a crypto pump-and-dump disguised as a charity drive while taking home tens of thousands of dollars
Scammers are exploiting people who are afraid of missing out, FOMO (fear of missing out), and looking to make a quick buck by jumping on new crypto coins.
Here are the facts about crypto pumps-and-dumps.
What is a pump and dump scam?
A pump and dump is a securities scam usually involving stocks. To generate interest, scammers make false claims about a stock. The stock’s price rises once investors begin buying shares. The scammers behind the fake hype will sell all their shares once the stock price reaches a certain level. The stock price plummets, leaving new investors with nothing but their shares.
The movie The Wolf of Wall Street portrayed the infamous pump-and-dump scam conducted by Stratton Oakmont investment firm in the ’90s.
What is the best way to scam cryptocurrency?
It works the same way as stocks. People can pump up a certain crypto asset to increase its value.
Douglas Horn, chief architect at Telos Core Developers, stated that as prices rise, pump creators will dump their assets into FOMO. This results in a price crash which leaves new buyers with a bag of assets that have a lower valuation than when they were bought. This can lead to significant and sometimes unrecoverable losses.
What’s different is what’s used for the pump-and-dump. Bitcoin, Etherereum and Dogecoin are well-established cryptocurrencies, and it takes someone with the following of Musk to increase or decrease their value. However, since creating a whole blockchain system for a currency takes a lot of time and effort, those knowledgeable about coding can create their own crypto tokens, which are digital assets using an already existing blockchain like Bitcoin or Ethereum.