Cryptocurrency Pump & Dumps

Cryptocurrencies like Bitcoin and Dogecoin have seen greater adoption by retail and institutional investors over the last year. I’m not going to get into the reasons for this, but the ubiquitous stories of crypto millionaires add to the fear of missing out (FOMO). 

I use discord for a subset of my online collaboration, and that includes following some cryptocurrency groups. One day, I received a DM with an invite to a cryptocurrency pump group that promises early notification for when and which coin to buy. The idea is that the group organizers regularly coordinate pumps, which is done by convincing a massive group of people to buy simultaneously or in a relatively short period. This action increases the price of the selected cryptocurrency and should allow me and anyone else in the group to sell at a hopefully significant profit. Sounds good, right?

The image above is a sample of one of these cryptocurrency pump group invites.

If you get one of these from someone you know or a seemingly legitimate user, it’s typically because these fraudsters incentivize the userbase to go out and get other users to join the server. The basic idea is that you get perks based on the number of users you bring to the server.

These groups are scammers preying on the unwitting. I’ve observed these groups for a while now, and it’s relatively easy to see that you can hardly benefit from the early signal. Before an alert is even published, the organizers have already taken up positions days or weeks beforehand.

The scam starts by announcing that there will be a pump of some coin that will be revealed at a specific time, date, and sometimes an alternate platform such as telegram.

In the screenshot above, you can see how creative and enticing they try to make the con.

I use the Trading View website to look at technical analyses charts of stocks and cryptocurrencies. The charts below represent a few of the cryptocurrencies I observed being pumped and then dumped.

Green candles tell us the price is moving up, and the red candles tell us the price is moving down. Notice that one set of candles are significantly larger than the rest. The variance is typically indicative of a pump (huge green) and dump (huge red), occurring naturally or artificially.

The chart above is another example of a different cryptocurrency, where each candle represents a minute. I’m sure you can spot where the pump and dump occurred. The purported insider announcement to buy happens right at the pump. The folks that are ignorant of the scheme then end up “buying the top” while the true insiders sell at a significant profit. That rapid and immediate sell action is the dump. Victims will have very little chance of getting out of their position at a profit in the short term. Typically, the people who realize their misfortune end up deciding to sell at a loss or hoping for a repeat pump to exit their position.

These groups target small cap cryptocurrencies which are easy to manipulate because of the low volume. Coins like Bitcoin can also be pumped, but are more difficult due to the higher market volume.

This last screenshot above is meant to show you how the crypto pump and dump groups spread the news, but it’s all a sham, the con is over in a matter of minutes and the ‘Social Media Effect’ is merely a ruse to try to increase your confidence.

If you have thought about joining one of these groups or ever get an invite, hopefully, I have given you enough information to avoid becoming another victim. Thanks for reading.

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