[Brief: For our editorial content going to both our Risk & Reward and Cryptocurrency Profits services, research and write a 1500 word piece that makes readers aware of some of the crypto scams plaguing Twitter.]
From Victor Lustig, the man who sold the Eiffel Tower twice, to Charles Ponzi, the man who left us with the ever-present Ponzi schemes, scams are a plague that have blighted every money-making opportunity that history has thrown our way.
And what is the quick-fire money-making scheme that’s got everyone’s attention right now?
Cryptocurrencies.
And the scam of choice at the moment?
Pump n’ Dumps
Simply put, people are buying altcoins at low prices, and selling them at higher prices…
Nothing suspicious about that right?
Well, there is if all of the people buying and selling are doing it simultaneously under coordination of a messenger group…
See, there exists a thriving hub of groups populating social media platforms that purposefully advertise and recruit potential crypto investors.
Why?
Well in theory, the more people that join the group and invest in the same coin at the same time, the higher the price of the coin will go. In turn, this encourages outside investors to rush in and buy the rapidly rising coin, pushing price even higher.
But there’s a sting in the tail…
The same coordinated group then simultaneously sell their stakes when the price reaches a pre-determined target, effectively ‘dumping’ their stock for a healthy profit.
Where does that leave the outside investor unaware of the group?
Well, their investment just lost a significant chunk in value.
These are the so-called altcoin ‘pump groups’, and they exist across all of your favourite social media platforms.
However, with the rising popularity of the groups, the names have changed to entirely inconspicuous ones such as ‘Pump n’ Hodl’ and ‘Pump n’ Chill…
It’s an epidemic in many respects, with the most common platform for forming these groups being the anonymous messaging app, Telegram – a platform with over 100 million users.
In many ways, the groups are actually incredibly sophisticated.
Members are encouraged to market hard, increasing the number of members through social media advertising; which in turn, builds hype and consequently… attracts new investors.
Groups can range from 2000 members to over 200,000, and can therefore make a huge impact on a targeted crypto’s price.
Some groups even charge fees for membership, ensuring they make money irrespective of the success of the pump n’ dump.
But why are people doing it?
It is easy to see the attraction no matter how immoral it may seem; the lure of instant profits gained through a well-organised pump group seems like a guaranteed way to make quick money.
People are engaging in these schemes several times a day, with a single pump n’ dump taking just minutes. It is made all the more attractive by the unregulated nature of the crypto markets, meaning participants receive no reprimand.
What’s more, groups offer incentives to members who invite more people.
Their reward?
Time advantages. This privilege ensures that they get a head-start over others in the group by giving them staggered alerts before a pump or a dump takes place. There is more often than not a rigid hierarchy within the groups themselves, with innermost members taking the highest profit.
It’s a tried and tested Ponzi scheme in its most modern form, and it’s leaving a bad taste in many crypto investors’ mouths.
Cryptos are billed in many respects, as providing the opportunity to access easy, instant wealth. The precedent that Bitcoin has set has left many with the hunger and belief that they can find the next big percentage increase; regardless of the method and consequence.
Not what they seem…
Usually, a celebrity is often required to indicate when they are paid to promote a product or service, however with cryptocurrency, this a somewhat murkier field.
You may have heard of John McAfee, the computer software tycoon responsible for antivirus programs, well he is a perfect example of the crypto deception that is taking place across social media platforms.
McAfee has over 700k Twitter followers, and he has previously promoted which coins to invest in. Allegedly, for 25 Bitcoins and 15% of the chosen coin, he would release a Tweet endorsing the coin. However – he has since claimed his account was hacked…
Regardless, it is a classic example of either false advertising or immoral entrepreneurship, both aspects that are prevalent in the crypto space.
This very public promotion inevitably triggers a buying frenzy of the coin in focus, only for many investors to be caught short by the ensuing dump.
Ironically, McAfee is now experiencing a number of cases of identity fraud.
Scamsters posing as him on Twitter are asking gullible followers to send him small proportions of crypto in return for significantly larger amounts, all on McAfee’s genuine Twitter thread. It seems blatantly obvious I know, but people have been falling for it in their droves.
This is an age old scam that is finding a new lease of life in the crypto world, with Ethereum founder Vitalik Buterin and Litecoin inventor Charlie Lee also falling foul of the impersonations.
This was Lee’s personal warning to his followers (690k) following a number of attempted impersonations by scammers…
Please be wary of this Twitter scam going on right now. After my posts, there will an immediate reply by a scammer promising to give away coins if you send him some. The post looks like it’s from me. Blocking them doesn’t help, b/c they just create another account.
These scammers have also started to block me before they reply to my posts. So I don’t even see their posts. Twitter needs to do some machine learning to hide these scam and spam posts. It’s really getting out of hand.
And those “join pump group” posts. People this gullible?
Fake celebrity accounts are common amongst social media, and it is imperative to not get caught up in the fervour surrounding them.
Pump n’ dumps offer a great opportunity to harness the power of influence and celebrity, preying on naivety and amateur investors’ thirst for quick profit.
Below is a prime example of a pump n’ dump in action. Note the sudden rise and fall of the GVT coin’s price over an extremely short period…
The strategy may seem rather reliable on the face of it, and if you’re seeking a quick profit, it’s an attractive thought. Yet investors fail to factor in the natural volatility of the existing market of the coin, meaning price could alter in an instance, leaving you out in the cold with a big loss.
Add to this the human factor…
As previously stated, many of the attempted pump n’ dumps have huge numbers of participants.
And human beings are subject to panic, particularly when it concerns something valuable of their own. Pump n’ dumps are very time-sensitive and involve a lot of people. Now what do you get when you mix time-sensitivity with a lot of people’s money?
Mass panic.
These mass panics often result in huge sell-offs before the established sell target is reached, triggering other investors into a similar selling frenzy.
And the end result? A lot of investors left with egg on their face.
A better way to profit from cryptos
We need to remember we are in uncharted territory when it comes to cryptocurrencies.
Every week is presenting new challenges, new optimism, and new waves of scamsters trying to take advantage of the unassuming tidal wave of virgin investors.
Fake news is becoming ever more prevalent within the crypto world. Just last week, crypto news site Cointelegraph fell victim to phishing attacks, with imposters posing as the company’s representatives offering partnership deals.
It seems no avenue of cryptocurrency is safe from an attack of some sort.
We have to remember, with unregulated markets comes high-risk.
It is crucial to keep your ear to the ground and up-to-date with the latest crypto news if you are an investor. If you ever have doubts over authenticity of a crypto opportunity, stay away.
For example, a great site that lists the addresses of coins and ICOs that are scams is called Clearify. In just two days they flagged over 150 scam addresses from Twitter alone!
Research is key to any investment. Rather than the incredibly risky and unreliable pump n’ dumps, research the purpose of the coin and whether it will last over the long-term.
By trading and investing in higher volume cryptocurrencies, researching promising lower-cap coins above a certain volume threshold and learning technical analysis, you have a much better chance of staying away from the dark underbelly of the crypto world.
Of course, you may not have the time to do your own in-depth research. That’s where our Cryptocurrency Profits team comes in…
Our team of four expert crypto investors provide their insight into a constantly changing marketplace. On top of their comprehensive educational articles and videos, they provide fully researched investment proposals for the coins they feel have huge potential. You can find out how to subscribe here. (LINK)
The thing to remember with cryptos is that if it sounds too good to be true… it probably is.