"Until you realize how easy it is for your mind to be manipulated, you remain the puppet of someone else's game"
As the cryptocurrency markets grow it attracts the attention of many investors which is something positive but on the other hand, it also represents an opportunity for scammers to take advantage of the market. One of the most common lucrative illegal practices is Pumps and Dumps. The following post will explain how pump and dump schemes work and spot them and protect yourself against them.
Pump and dump is a market manipulation strategy in which a group of people pumps the prices of a token with temporary small investments, once the token gains attention and other newbie investors get in, they sell and dump the price while making a profit.
If you have a small capital and been researching coins and their projects you will understand that small scale tokens and projects have the highest return on investment, the dark side about this is that they attract many pump and dump groups
The following guide will help identify the red flags of a potential pump and dump scheme:
1- Surprising news after a quiet period
Pump and dump scammers try to distribute fake information about a specific token on different social media outlets to justify the increased price action, be aware of this trick and make sure the information is coming from the official board of the token project.
2- Don't be emotional and do your research
Your desire and motivation to profit big works against you when trying to spot a pump and dump scheme, the scammers are aware that people want to make huge profit overnight. Stay calm, do your research, look for the real reasons behind the price action, and ask the other investors.
3- Check the volume
This is really crucial, upon checking the chart of a specific token, pay attention to the buy action over the course of one or two weeks, if they're a small consistent push of the volume then you might be looking at a potential pump and dump.
4- Media coverage of the token
Legit crypto projects have a solid social media marketing strategy and always communicating with their investors with the latest and upcoming news, they also have a legit marketing team, and their personal information is provided. If you can't find that, be aware.
5- Transparency
Going back to research, it is easy for projects to lie about who is working on their team and it's hard to check those things, so take your time and make up your mind.
6- Join Pump and Dump Groups
This might be a wicked way but it's one of the most efficient ways to protect yourself against these illegal practices, there many P&D groups, all you got to do is joining them and keeping a clean eye on what tokens are being targeted to protect yourself and others.
If you have other tips on how to spot pumps and dumps please feel free to share them in the comments section.- -