Pump and Dump Crypto: what it means

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Pump and Dump Crypto: what it means

The universe of the online trading, a fascinating financial arena accessible from the comfort of one's home through one's computer, offers opportunities for gain that can, however, be accompanied by considerable risk.

Before diving into this world, it is essential to first. open an account with a financial broker, engage in in-depth study of the markets and engage in practice consistently.

In a nutshell, trading consists of. In buying and selling of financial securities via the Internet, with the goal of profiting from the price difference. However, behind this scenario of potential gains may lie an insidious problem: that of the Pump and Dump Crypto.

What does Pump and Dump mean?

The concept of Crypto Pump and Dump, literally translated as "pump and deflate," represents a form of fraud aimed at artificially increasing the value of a stock or low-capitalization asset, with the ultimate goal of selling these securities at a inflated price.

This is not the first time one has had to deal with this kind of scam: in the past, in fact, it was easy to be victimized by telephone. Today, with the spread of the Internet, this practice can involve a vast number of users through emails in a few moments.

It is a scheme of market manipulation particularly widespread in the cryptocurrency industry, where some individuals try to take advantage of the benefits of this incredible technology to profit unethically.

The transaction unfolds with a sudden rise in the price of the asset, generating huge gains for those orchestrating the whole thing, followed by a massive sale of the same assets, causing a sharp drop in prices and causing financial losses among new investors.

The harm from the practice, then, we can say is twofold: first, they cause the devaluation of an asset, by selling it massively, making it less valuable and causing others to miss opportunities for profit.

According to him, the scam lies precisely in the forced price manipulation: first exaggeratedly high, for a product that is actually not worth that much and is bound to depreciate as a consequence at the pump anyway.

How Pump and Dump is applied for cryptocurrencies

The application of Pump and Dump in the cryptocurrency context manifests itself through a well-orchestrated strategy. Initially, individuals or groups of traders promote a digital asset through a targeted advertising campaign, creating hype around its technical potential.

The operational sequence is clear: acquisition of the asset, promotion through highlighting its potential, waiting for investors to come in, followed by sale. This cycle is repeated with other assets, creating a Dangerous market manipulation scheme.

In the cryptocurrency world, the Pump and Dump technique evolves further. The orchestrators of these scams can send millions of emails with misleading financial advice, selling pumping crypto, presenting equities that look profitable.

Acquiring in advance securities of companies low-capitalization, the organizers cause an artificial increase in prices. The unwary investor, influenced by the marketing campaign, contributes to the price increase, which in turn Provides an opportunity for fraudsters to liquidate their positions, leaving investors with significant losses.

It is an unfortunately widespread practice that is bringing numerous problems to the world of trading and Crypto, but fortunately it can be easily detected and there are ways to defend yourself.

How to recognize a Pump and Dump scheme

To successfully defend against a Pump and Dump attack, it is important to first recognize the possible scam, a process facilitated by the use of a few precautions and a good dose of common sense.

First of all, the emails promoting these scams often feature objects with eccentric names, full of euphoria, so caution should be triggered immediately upon opening messages with such characteristics.

In addition, attached files in PDF or Excel format, especially if they are excessive in size, are another red flag. The use of software that can block such files before they reach the server can be an effective barrier against these scams.

In the context of trading, identifying a Pump and Dump scheme requires an attitude of utmost skepticism in the face of overly flattering communications about certain assets.

Awareness of the persuasion techniques typical of marketing can be of great help. In the case of mass information, it is essential to exercise a healthy skepticism toward situations that seem too convenient and easy to grasp.

How to Defend Against the Pump and Dump

Being able to protect oneself from Pump and Dump schemes requires a combination of awareness, precautions and wise investment choices.

First of all, it can be very useful for example report the irregularity, as proposed by the Commodity Futures Trading Commission (CFTC) offering rewards for relevant information.

In addition, The establishment of a self-regulatory organization. (SRO) could be a significant step in preventing such scams, although the effectiveness of this proposal remains to be tested.

To actively defend yourself, it is crucial then to invest only in through trusted platforms and certified, adopt a secure crypto wallet with private keys, and pay attention to any suspicious activity on your account or in the app wallet.

The investor must avoid giving in to pressure of scammers who try to induce hasty investments, especially in response to promises of bonuses or immediate discounts.

Paying attention to social media advertisements and rejecting cold calls are also essential measures to succeed in protecting one's funds. The accurate research on cryptocurrencies, avoiding companies that promise overly attractive returns, ultimately helps create a barrier against financial scams.  

You want more information about the crypto dump and pump And find out how to protect yourself? Contact Crypt&Co for a legal advice on cryptocurrencies.

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