After all of the recent events I feel inclined obligated to talk about pump and dump schemes.
Pump and Dumps have a negative impact on the crypto-community
Let's first define what a pump and dump is:
'Pump and Dump' is a general term used when a promoter, or group of promoters pump of the price of a stock (or cryptocurrency) with hype, false promises, or flat-out lies. Our community as a whole has been fortunate enough not to deal too heavily with people blatantly lying yet. However, we have experienced the first two types (hype and false promises). What has been happening recently is that a promoter will start a pump and dump group via telegram, then, they will invite as many members as they can to that telegram and post what coin to pump at a specific time. Usually, the promoter and the friend's of the promoter will derive a profit either by charging a membership and telling some people the name of the coin early, or by buying and accumulating the coin a week in advance and then selling for an insane profit on the day of the pump. These are called Flash Pumps and they're what our community has been exposed to most.
However, we have begun to face a new type of pump and dump, slow pumps
These types of pumps are more typical to the actual stock market where penny and micro-cap stocks are live. What happens is that a group of promoters will take a stock that has a very low market cap (taking a cryptocurrency with a low marketcap... Sound familiar?), and they will promise everyone else that they will make insane returns if only they buy the stock! However, the promoters will give the investors extremely unrealistic goals causing all of them to hold the stocks until it eventually crashes into oblivion. If you think about it, this is sort of a pyramid scheme, where early adopters and friends buy with the announcers, and the later you buy the farther up you are on the pyramid. The closer you are to the top, the more you risk losing money.
What cryptocurrencies have we seen this happen to?
Digibytes immediately comes to mind. Digibytes was extremely overhyped for more than a month leading up to a presentation at citibank. Some investors saw returns of 10x or more of their initial investment over this short period of time. Buy volume increased drastically from two months prior leading up to the days right before the event. The people who made money, are not the ones who bought in late, but the ones who saw the shilling early on. The same story, on a smaller scale goes with ARK, it was continually shilled until it imploded and now sits 60% under its ATH from June. People may argue that there was still a lot of money to be made off of these... But what about the new investors who were tricked into buying DGB at 20k sats? Or the people who purchased ARK at 4k sats?
And now, we are seeing the same set of events happen with ChainCoin. People will tell you that there is money to be made... But where is the top?... Do you really think a coin that hasn't seen any development in over 4 months will break a 1 bil market cap because some guy says 'hodl'?
Regardless, pump and dumps have become moderately predictable
Am I a bitter baghodler? No.
If you look at the timestamps of me purchasing the coins compared to the timestamp at which I sold them, you will notice that I buy them many hours or even days before the pumps occur.... That's because if you buy when the pump is announced you are already way too late. Look at the last image I posted about influx... Pumps are usually announced on the hour to the second, you will notice that there is a HUGE volume of buying one minute before 9 AM and small buy volumes in the minutes leading up until that... That is indicative of a pre-pump, the thing that most new investors do not realize until it is too late is that these coins are pre-pumped by the owner of the pump group as well as by 'elite' inner circles (who often pay the head boss a fee). Take note that my sell order was executed THREE seconds after the hour hit...
A Better Strategy for would-be pump and dumpers
Take a lesson from my book, invest disposable amounts of your bitcoins into coins you think will be pumped, and just hold them. Again, I say disposable because most of these coins have no future... For every 4 coins I invest in, 3 never get pumped.
For every coin I make a 2:1, 7:1, or 10:1 profit, there are 200, 700, or 1000 people losing their money...
There wil be an ATH (All Time High) for chain coin. Many people will invest at or near the ATH... Afterwards, there will be the select few who made money of off the greed of the masses, and there will be the masses, who lost.
In conclusion, this sort of behavior is not healthy as it will deter outside investors on the edge of taking a plunge into the cryptocurrency game. I hope you liked my post and learned something from it. Be careful traders!