‘Pump & Dump’ Schemes in the Crypto Market: How To Identify Them

Scams have been alive and thriving in the financial sector since time immemorial, and the crypto market is no different. One particular type that I will look at here is the “pump and dump” scam. There is no dearth of these schemes in the crypto world and the industry is flush with them. There’s news about rug pulls almost every day where investors lose their money to scams perpetrated by the developers. However, scammers escape scot-free after indulging in fraudulent activities in the crypto sphere. Why you may ask? Well, unfortunately, they have the privilege of remaining anonymous in this market.

There are thousands of tokens where the founders are anonymous, with little or no hint about their background. There’s a high possibility they can escape without a trace if they decide to shut shop. The latest and biggest ‘pump and dump’ scheme in recent memory is the infamous Squid Game Token. The devs fled with funds of nearly $12 million and the token then crashed 99.9% within seconds. Even now, nobody knows who was behind the scam and the fraudsters disappeared in thin air.

Here’s How You Can Identify Pump & Dump Schemes

The first and foremost way to identify a pump and dump scheme is to gauge how the token operates in general. If the token is novice and spikes in price after attracting new investors but simultaneously sees sell-offs getting higher in a few trading hours, then it should be considered suspicious.

There are many tokens that create hype and cause their price shoot up drastically. On the other hand, the devs make use of the hype and indulge in sell-offs, and pocket all the profits. Once the hype fizzles out, the token barely moves at price, and at the same time, the developers have already filled their pockets.

Another way to identify potential ‘pump and dump’ schemes is to follow the tone and language used on social media channels. For example, if the developers mostly ‘copy-paste’ whitepapers, about us, and tokenomics from other coins claiming it as their own, then that should be considered suspicious.

Moreover, the language will have the same ‘copy and paste’ tone even on Discord channels. Coming to Discord, keep an eye on how the moderators respond to investors’ questions even if it is uncomfortable. If the moderators ban or remove users from the group for difficult or probing questions being asked, consider the token to be suspicious too.