Understanding the risk of pump diagrams and dropping in cryptocurrency
The world of cryptocurrency is developing rapidly, and new technologies and innovations appear every day. Although it can be an exciting and potentially lucrative investment space, there is also a risk that salesmen and investors should be about.
One of the most important threats associated with investing in cryptocurrency is the pump and dump scheme. The pump and dump scheme is a kind of investment fraud in which a group of people artificially overstates the cryptocurrency price by distributing false or misleading information about its value, often through internet forums, social media and other digital platforms.
What are pump and dump diagrams?
The pump and dump diagram usually takes a few steps:
- The initial offer of coins (ICO) : The new cryptocurrency is launched on the stock exchange, offering it publicly in the hope of generating interest and revenues.
- False positive messages : The creators or their supporters disseminated false information about the value of cryptocurrency, such as the claim that its price will increase rapidly or that he has a revolutionary technology that solves a serious problem.
- Increased price : non -trials leads to an increase in the demand for cryptocurrency, causing a rapid price increase.
- dropping
: When the price reaches unbalanced levels, the scammer sells their shares at an inflated price, often leaving significant losses to other investors.
Red flags: Identification of the pump and dump diagram
While the pump and dump diagrams can be difficult to notice, there are several red flags that may indicate fraud:
- excessively promotional language : Watch out for messages or advertising that use an exaggerated language or promises that seem too good to be true.
- Unrealistic price benefits : If the price increases rapidly without any basic value or innovation, it can be a pump and drop diagram.
- Lack of transparency : Be careful whether the creators or cryptocurrency administrators do not want to provide clear information about its development, technology or finance.
- Suspicious trade patterns : monitor trade activity for unusual patterns, such as suddenly price jump and then quick drops.
Protection against pump and screenshots
To avoid incidence of the victim of the pump scheme and dump:
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Application
While investing in cryptocurrency is associated with risk, awareness of the pump and dump scheme is an important step in protecting yourself against potential losses. Understanding the red flags and taking steps to protect the investment, you can certainly move around the world of cryptocurrencies. Remember to be informed, conduct thorough research and diversify the portfolio to minimize exposure to this type of programs.
Additional resources
If you want to learn more about investing in cryptocurrency or want to be up to date with the development of the industry, consider visiting the following resources:
* COINDESK
: leading source of messages and analysis on the cryptocurrency market.
* cryptozate : a popular platform for discussing topics related to cryptocurrency and remained informed.
* Blockchain Council : Non-profit organization, which provides guidelines and support for investors and programmers.