What do cryptocurrency pump-and-dump groups do? Are they legitimate?

Crypto pump-and-dump organizations encourage the marketing of unregulated currencies through Discord and Telegram since laws for the cryptocurrency industry are still being created.

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What are pump-and-dump crypto groups? Are they authorized? WHAT IS CRYPTO?

Pump-and-dump techniques have been used in economic contexts since at least the 1700s to deceptively control prices by spreading misleading information. For instance, at the beginning of the seventeenth century, con artists with stock in the South Sea Company began making false claims about the company and its profits.

The idea was to artificially increase the stock price before selling it to unaware buyers who had been duped into believing they were purchasing a promising product. Modern con artists are imitating them by using the South Sea Bubble, a pump-and-dump scheme.

The problem has expanded and gotten worse, though, with the development of blockchain technology and the emergence of cryptocurrency trading. Cryptocurrencies are especially vulnerable to this sort of market manipulation since government regulation has lagged.

You will discover what crypto pump-and-dump scams are, how they operate, and how to recognize them in this post.

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What are pump-and-dump crypto groups?

In a pump-and-dump scheme, fraudsters stockpile a commodity over time, artificially inflate its price by spreading untrue information (pumping), and then sell what they have gathered to naive customers at a higher price (dumping). After the fraudsters have artificially raised the price, it often drops, leaving buyers who made their choice based on false information at a loss.

Online pump-and-dump activities are carried out by self-organized groups of people. On the voice over internet protocol and text chat services Discord and Telegram, these pump-and-dump groups plan the schemes in full view, making it feasible for anybody to join the groups without permission.

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There is a hierarchy of members and leaders (or admins) who run pump-and-dumps organizations. Higher ranking users are informed of the target coin's disclosure earlier than lower ranked users are, which starts the pump. The member has a better chance of acquiring at a lower price and making more money from the pump-and-dump plan in this way.

The majority of organizations are organized utilizing an affiliation system, where members may advance in rank by enlisting the aid of fresh recruits. The rating increases in direct proportion to the growth of the group's membership. In contrast, some organizations only have two tiers in their hierarchical structure: VIPs and ordinary members. A user must pay a fee to join these groups, often in Bitcoin.

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What do indications of a crypto pump and dump mean?

The goal of a crypto pump signal is to persuade others to buy a cryptocurrency so they may benefit from the price manipulation brought on by the sudden increase in demand. Members start selling at a big profit once the pumping results in a substantial price increase, which are known as crypto dump signals. As shown below, there are two categories of groups on Telegram and Discord that send signals on unidentified crypto currencies to artificially boost the value of the underlying coins:

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In pump-and-dump crypto groups on Telegram and Discord, the following methods are typically used for message distribution:

Information and How-To: These two parts mimic a digital message board with message pins. Each section consists of several rooms, each of which only has one or a few texts. The rooms of the information area are often where you can find the group's rules, news about the group, details on the affiliation system, and answers to commonly asked questions. Similar to this, the rooms in the How-About sections may contain guides to the cryptocurrency sector or best practices for participating in a pump-and-dump operation.

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Signal: This is its core hub, and only administrators may post here. The trading signal rooms and the pump signal

The rooms in this section are home to the server's bots. Here, users may inquire about how many individuals joined the server using their invite links or request the bots' invite links in order to recruit more players.

Discussion: In this section's rooms devoted to diverse subjects, group members are allowed to have open dialogue.

What exactly is a crypto pump and dump?

The activity levels of the various pump-and-dump organizations on the internet vary. The more active ones perform around one pump-and-dump cycle each day. Only one procedure each week may be performed by less active groups. When they believe the market circumstances are good, other firms engage in activity. So, is it profitable to buy and sell cryptocurrency?

Because a pump-and-dump strategy involves artificially inflating the value of a crypto asset shortly before a deliberate and unexpected drop, there may be a possibility to profit from it. If you don't get rid of the unidentified coins soon enough, though, you'll be stuck with them for a very long time. Please keep in mind that nothing in the unpredictable cryptocurrency market is certain; as a precaution, familiarize yourself with the fundamental crypto metrics to prevent getting duped by projects that seem "too good to be true."

Please go through the steps that cryptocurrency fraudsters take to deceive the channel members in order to comprehend crypto pump-and-dump schemes:

Distributing the essential data

The admins give notice of the exchange that will be utilized, the specific time that the operation will begin, and whether the scheme is FFA or Ranked. Those with a VIP level receive the notice at the same time or a few days or hours before the operation if it is free for everybody.

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Defining the underlying coin's mission

The statement is repeated more often as the commencement of the operation draws near.

The objective coin is revealed to the group before the pump starts. When you are told of the commencement time will depend on where you are in the hierarchy.

Typically, the cryptocurrency's name is printed in a purposefully obfuscated visual that only humans can quickly decode. Obfuscation is used to prevent bots from processing messages faster than humans using optical character recognition (OCR) techniques.

OCR is a technique for converting text from an image into a text format that computers can read. If you scan a form or a receipt, your computer will store the scan as an image file. A text editor cannot be used to change, look up, or count the words included in the picture file.

Spreading rumors to attract external investment

After the pump starts and the admins tweet or share the news, requesting everyone in the group to spread the information that the cryptocurrency price is rising, market manipulation in cryptocurrencies finally commences. Users propagate their word via Twitter, forums, and specialized chat rooms in an effort to create the so-called FOMO (Fear of Missing Out) of a wonderful investment opportunity and attract outside investors.

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How can a crypto pump-and-dump strategy be identified?

You could wish to inquire about the legality of crypto pump-and-dump organizations as information about unidentified currencies is distributed in Discord and Telegram channels. Pump-and-dumps are forbidden on the stock market, but since the majority of cryptocurrencies are not regarded as securities, they routinely take place there. 

So how do you identify a pump and dump cryptocurrency? Investor safety depends on knowing if and how quickly someone can implement a pump-and-dump scheme. Despite the fact that there are no surefire signs of pump-and-dump cryptocurrency scams, you should be wary of excessive enthusiasm around a project or its token since they might be warning signs. Investors should thus continuously assess cryptocurrency ventures before making wise investment choices.

Another indication of a pump-and-dump strategy is a cryptocurrency's price rising quickly and parabolically. This is particularly important if the cryptocurrency has previously been ignored, unacknowledged, or forgotten. 

Despite the fact that many influencers and celebrities are unfamiliar with cryptocurrencies, if they are paid to do so, they will simply promote them (even if they are scams). As a result, before placing faith in the future of unproven crypto initiatives, one should be cautious of such strategies. What steps should cryptocurrency investors take to prevent pump-and-dump scams? Trading or investing requires deciding on a plan and adhering to it. One may make sure they only invest in bitcoin projects or assets they are familiar with by using this strategy.

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