BITCOIN / TETHEREducation
Market Manipulation: Crypto Pump and Dump Schemes
If you look at the price charts for many cryptocurrencies, there is often a very sharp, sudden spike in their earlier days.
Most cryptocurrencies’ charts either have a more or less gradual decline or increase in price, or display a virtually straight horizontal line, indicating not so much a lack of volatility as a lack of trading or interest altogether in the project. You can also sometimes see big waves where the cryptocurrency was gradually manipulated or affected by markets.
But, in many cryptocurrencies, particularly the smaller, lesser-known ones, at one or more times in their history there is a sudden vertical needle in the charts, an almost instantaneous increase in its price by hundreds of percent, and then, shortly, or often even almost instantly, after, just as rapid a decline in its price, back to where it started.
If it didn’t happen so frequently, one might be forgiven for thinking it’s a blip in the charts, a mistake or a problem with the exchange. Except these needles happened all too frequently on charts of many of the smaller cryptocurrencies. These needles – sudden price increases in the hundreds of percent followed by a sharp collapse, were caused by a particular type of very legally grey trade known as the pump and dump.
In the world of crypto pump and dumps, some made money, often a lot, and most lost it all, often within seconds and often without really knowing what had hit them.
Manipulation of markets has gone on since trading began. Unfortunately for those wanting to profit from manipulating stocks and traditional assets, doing so is highly illegal, and tends to result in high fines and jail time.
However, greed, money, and success can be big motivators and there are always some who will keep pushing the grey areas of the law until they either get their way or get caught.
In crypto, there have been a lot of grey areas and the markets were volatile enough for individuals to manipulate to part hundreds of thousands of people, if not more, from their money in a whole series of promotions designed to pump and dump, project after project.
Stock exchanges that don’t take adequate measures to prevent stock manipulations can face heavy legal penalties, so for the most part they play above the law. Unlike traditional stocks where markets are heavily monitored and regulated, cryptocurrency, as we have already seen, has been a bit of a Wild West. Regulation is starting to come, but until then, crypto markets have been treated as a free-for-all adventure ground where anything goes.
Most cryptocurrencies’ charts either have a more or less gradual decline or increase in price, or display a virtually straight horizontal line, indicating not so much a lack of volatility as a lack of trading or interest altogether in the project. You can also sometimes see big waves where the cryptocurrency was gradually manipulated or affected by markets.
But, in many cryptocurrencies, particularly the smaller, lesser-known ones, at one or more times in their history there is a sudden vertical needle in the charts, an almost instantaneous increase in its price by hundreds of percent, and then, shortly, or often even almost instantly, after, just as rapid a decline in its price, back to where it started.
If it didn’t happen so frequently, one might be forgiven for thinking it’s a blip in the charts, a mistake or a problem with the exchange. Except these needles happened all too frequently on charts of many of the smaller cryptocurrencies. These needles – sudden price increases in the hundreds of percent followed by a sharp collapse, were caused by a particular type of very legally grey trade known as the pump and dump.
In the world of crypto pump and dumps, some made money, often a lot, and most lost it all, often within seconds and often without really knowing what had hit them.
Manipulation of markets has gone on since trading began. Unfortunately for those wanting to profit from manipulating stocks and traditional assets, doing so is highly illegal, and tends to result in high fines and jail time.
However, greed, money, and success can be big motivators and there are always some who will keep pushing the grey areas of the law until they either get their way or get caught.
In crypto, there have been a lot of grey areas and the markets were volatile enough for individuals to manipulate to part hundreds of thousands of people, if not more, from their money in a whole series of promotions designed to pump and dump, project after project.
Stock exchanges that don’t take adequate measures to prevent stock manipulations can face heavy legal penalties, so for the most part they play above the law. Unlike traditional stocks where markets are heavily monitored and regulated, cryptocurrency, as we have already seen, has been a bit of a Wild West. Regulation is starting to come, but until then, crypto markets have been treated as a free-for-all adventure ground where anything goes.
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