How do you know a crypto pump or dump before it happens?
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The easiest way to identify a pump and dump scheme is when an unknown coin suddenly rises substantially without a real reason to do so. This can be easily viewed on a coin’s price chart. Also, when you see paid news articles about a small cap coin appearing in combination with a surge in social media activity surrounding that particular cryptocurrency project, this could be the sign of a pump taking place. If an entirely unknown coin with market capitalization of only a few million dollars suddenly appears all over Twitter and Facebook, one should be wary. One good way to reduce your chances of failing victim is avoiding illiquid cryptocurrencies.
The pump and dump scheme is just old wine in new wineskins: it’s been around for ages. The scheme’s strength lies in its simplicity. The idea behind a pump and dump scheme is simple: A group of bad actors deliberately buys an asset, often small-cap stocks or other thinly traded securities, sings its praises to anyone who will listen — using false news or information to pump it— then sell when the increased activity drives up the stock price. This often leaves those who bought the hype holding the bag, as asset prices crumble and artificial demand dries up.