Feb 11th 2018 - Pump and Dumps... cool cash or cool scams?
Flip over to the first entry to get a complete understanding of my situation.
Dear diary,
I was watching the coin market at Coin Market Cap when I suddenly noticed a coin that had shot up 2,500% in just a few minutes. Naturally, I was shocked. What was this? Could a crypto really make such gains on such short notice? But then, after a few more minutes, the coin disappeared, only to be found much much much further down the ranks. It had been dumped.
'Pump and Dump's involve just that: artificially inflating the value of a commodity by increasing demand in it, then selling off as it reaches its peak. While they are not exclusively a cryptocurrency concept, the technique has become quite popular in that world, mainly given the unregulated and decentralised nature of the market. Outside crypto, however, pumps and dumps are a very serious financial crime. This isn't because persons are making sudden cash, but because by its very concept, a lot more are losing tremendously.
This is how they work. Across platforms connected to the network, a call goes up, announcing the beginning of a pump at a certain time. The identity of the coin to be pumped is withheld, only to be released a few seconds to the pump time. This ensures that every one buys at the same time. As the exchanges begin to note the increase in trading in the coin, the value begins to increase rapidly. As it climbs, those who bought the coin at a lower rate begin to sell (actually, the coordinator sets a peak value, but due to volatility and wariness, the coin sometimes doesn't get there). At the same time, they advertise the coin on other platforms, pointing to it's rapid growth as proof of its worth, encouraging others to get in the buying also. At this point, people have begun selling to make a profit As selling volume increases, the value begins to drop, sometimes much lower than it began with in the first place. Those who bought the coin at a high value are therefore left with a great loss.
Scam or not? Well, people do make out. And those who lose come back in hopes of making out big. More than anything, the scheme is akin to a gamble, with the player's luck depending on his ability to guess the pumped coin's peak value and sell on time.
UCash in the middle of a pump, just a few minutes ago. feel free to check it's value Now
Diary of a Crypto Time Traveler is a fictional story used to share real knowledge on cryptocurrencies, blockchains and predictions, and my own recent findings.
Read previous entries below:
#13 Feb 8 - Is This The Rise?
#12 Feb 5 - Navigating The Wallet
#11 Feb 2 - Market Decidedly Bearish! What Happens Next?
#10 Feb 1 - Eight Days Later, a new month, and a bearish market
#9 Jan 23rd - Transaction Fees
