Pump and dumps are a problem in the stock market, but in the crypto space, they are rampant. With little to no regulation, founder anonymity, low barrier of entry, and coins popping up daily, you need to know the red flags to look for and how to spot a pump-and-dump.

In this, I will cover what a pump-and-dump is, what are some red flags, my recommendations, and some examples of pump-and-dumps to give you some insight on them.

Video Timestamps:
00:00 Intro
01:20 Pump & Dumps
03:08 Red Flags
12:02 Example Case
15:52 Mindset
23:20 Outro

According to Investopedia these are the main takeaways regarding a pump-and-dump:
• Pump-and-dump is an illegal scheme to boost a stock's or security's price based on false, misleading, or greatly exaggerated statements.
• Pump-and-dump schemes usually target micro- and small-cap stocks.
• People found guilty of running pump-and-dump schemes are subject to heavy fines.
• Pump-and-dump schemes are increasingly found in the cryptocurrency industry.

The difference with cryptocurrency is that many times the people making all the money are anonymous and there is little regulation within the crypto industry so these crimes typically go unpunished. It’s made that much easier for these scammers given the unrealistic expectations people have in the crypto market and celebrities lending influence to these projects and effectively legitimizing them because they don’t the time or expertise to look into them.

Red flags to identify a possible pump-and-dump:
• Tons of press and hype
• Well above average gains recently with price action becoming parabolic
• The cryptocurrency moves drastically without any justifications or changes made
• The target demographic is not experienced/veteran users who could identify the scheme
• Typically, on low cap stocks and cryptocurrencies
• Huge social media presence that came out of nowhere (likely purchased & fake)
• No easy way to verify their claims
• You were specifically “chosen” to be part of this opportunity

You have to be mindful that pump-and-dumps are self-fulfilling. Once they get enough people in, they can use the price movement to market others into the scheme. It generally runs in 4 phases: acquisition, promotion, distribution, and then the dump. They first acquire the asset, then they promote it, finally once everyone is in, they sell, then once they stop marketing it and holding up the price it falls drastically and regular investors sell out causing it to fall further.

There are countless pump and dump groups that try to move tokens together, but you have to consider that these groups are usually made for the victims and those on the inside have already made their money off the scheme. It’s not worth trying to time it because only a few people who set it up knew when to get out. It’s especially concerning when you have to pay to be in the group too which is like a double scam.

A perfect example was Mark Cuban recently getting rug pulled on the Titan cryptocurrency. Rug pulled simply means the final phase of a pump-and-dump where they sell everything and crash the price. https://markets.businessinsider.com/news/stocks/mark-cuban-says-he-lost-money-trading-defi-token-titan-that-crashed-to-zero-2021-6-1030533245?op=1

Like this article and many others laid out, the price of Titan went from $60 to nearly $0 in one day. It was part of a stablecoin project called Iron Finance that was promising. There were claims that with certain pairs to TITAN, you could get up to 50,000% APY. More importantly, even a famous wealthy successful businessman like Mark Cuban can fall for great marketing and participate in a pump and dump so you need to be even more careful and cautious than him.

For the rest of the blog check it out here:
Publish0x: https://www.publish0x.com/at-scottcbusiness/pump-and-dumps-explained-and-the-red-flags-xoolnqe
Read.Cash: https://read.cash/@scottcbusiness/pump-dumps-explained-the-red-flags-a58961de

Have you ever been in a pump-and-dump? What are some examples of pump-and-dumps that you have seen in crypto? What red flags do you watch for? What do you invest in? Let me know what you think about this in the comments below and don’t forget to subscribe!