Wall street pump and dump bitcoin

The coming few days should shine some light on just how strong the army of retail investors entering the market is. Cole is a cryptocurrency analyst based in Los Angeles. He studied at the University of California Irvine and has been interested in Bitcoin and the crypto markets since Here at NewsBTC, we are dedicated to enlightening everyone about bitcoin and other cryptocurrencies.

Cryptocurrency Pump And Dumps – What Are They, How Do They Work, And How Are The Groups Organized?

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Advertise Submit a Press Release. Home Technical analysis XRP. Play Now! Tweet Share. It is these motivations that a pump and dump scheme operator exploit, and it is hard not to assign some amount of responsibility to the victim of these operations.

Pump and dump

Anyone who wants to invest in small tokens that aren't widely traded needs to be very good at research, and knowing what a company or platform does well before the tokens are bought. There are a few fool proof last-minute checks you can do before deciding to invest your money in a project and we're going to outline them right here. Before capital is put at-risk, it is very important to analyze the investment thesis that is driving the allocation and put it through some amount of scrutiny.

For example, if the thesis is: the token is going up in price and I just got a message on a Telegram group — further analysis is needed. It is very easy to share totally false information on popular platforms, and the price appreciation of a small token is simple to manipulate. Scammers may not have to do much promotion past the first round or two, as excited market participants buy tokens and send the tip out over trusted channels.

Another area of token information to be cautious with is online media or YouTube channels that specialize in distributing tips on what small tokens to buy.

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These sources of data are totally unregulated and may be paid to promote a token or project. Take a look over the past trading volume of the token that is flying up the chart. If there is a large buy over the course of a week, and then thin volume pushing the token up, be careful. It is important to be able to exit the position without moving the market, which is a function of the average volume of a token or share.

Most legitimate token projects will have a solid history of media coverage and company communication. Any viable project will likely have a presence on both GitHub and Medium, and it is a very good idea to see what it has been posting on its media portals. These have been instances of bad actors buying up an old, defunct token, and running a pump and dump scheme.

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Make sure the token has a legit development team behind it. If the token has a Medium account that has been dead for years, that is probably all you need to know. The people who are developing a project are as important as the idea they are working on. Management matters and many investors consider the management team to be one of the most important parts of an investment thesis.

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Keep in mind that people can lie about who is working on a project, so doing real research is necessary for anyone that wants to avoid getting scammed. Most pump and dump schemes are able to defraud investors because people think that getting in early to a great project will create huge returns.

In a sense, this is true. However, it is easy to forget that most companies fail, and when they go down, all the capital that was invested is lost. These companies aren't scams — it is just risky to start a new business. These aren't great odds, which is why VC is such a difficult market to make lasting profits from. There is a reason why pump and dump schemes target unsophisticated investors — it is easy to have big dreams of making large returns, but professionals understand how much risk is tied up in any early-stage company.

Professionals also understand that the assets have to be sold to lock in profits, which means deep liquidity and a wide investor base for the asset. Watching a token fly up in value can be exciting to a new investor who doesn't understand how difficult it is to actually sell a large position into the markets, and that is exactly what the scammers are counting on to make money.

Most of those tokens have smaller market cap and thin trading volumes like penny stocks.

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Making them ripe for pump-and-dump manipulation. Amid the speculative trading frenzy in the ICO boom, the new population of investors coming into the crypto space are prime to participate in pump and dump. Even if they present their predictions as accurate most of the time. Instead, take in as many different opinions as you can, do your own research DYOR.