Arguably, the government’s inability to influence cryptocurrency proceedings remains its most significant advantage. People may now keep their financial information private and tax-free – thanks to cryptocurrencies. There are also excellent legitimate, profitable opportunities. However, the absence of government regulation may well be a double-edged sword. Why? 

The crypto industry allows (and perhaps encourages) the use of questionable practices, such as the cunning pump-and-dump crypto scheme. This article will assess this dishonest practice and discuss ways to avoid falling victim to such tactics. 

What Is a Pump-and-Dump Scheme?

A crypto pump-and-dump scheme is when an investor, or a group of people, promotes a coin they are holding in bulk until its value grows so that they can sell it for significantly higher profits. Typically, an investor is an influential figure in the crypto space; therefore, many lower-level investors look to that individual for guidance.

How Does This Scam Work?

A pump-and-dump is an elaborate arrangement that follows orderly steps. The methods of propagation may differ, but the aim is always the same: hype up the coin to build its price, sell when the value is high, and exit the market just when others are about to profit. A pump-and-dump investor achieves his/her aim by spreading false, deceitful, or excessively positive information about the asset in question. 

  • People involved in the scam communicate through platforms where they can quickly gain the attention of others. For example, they communicate on anonymized messaging platforms, like Discord and Telegram, and social media apps, like Facebook and Twitter.
  • The preparation process may be subtle or obvious. A popular investor may indirectly speak in favor of the asset or mention it among other high-profile coins. While this psychological manipulation is going on, there’s a group of foot soldiers spamming every notable platform with good news about the coin. You can only resist for so long before noticing the messiah everyone seems to be talking about.
  • Consequently, the coin becomes popular, and transaction volumes and prices grow, providing the perfect opportunity for schemers to sell their volumes at excellent prices. Arguably, pump-and-dump may not be a terrible idea, but here’s what breaks the deal: The coin in question is rarely capable of reaching the heights the marketers claimed it would. 

How to Detect a Pump-and-Dump

Hundreds of new cryptocurrencies are created daily, and it’s only natural that the creators market the coin before and after its launch. Therefore, it may be impossible to identify crypto pump-and-dump activities immediately. However, these coins all have a similar modus operandi, so there are a few recommendations that can help stakeholders identify them as soon as they come across them.

  • Review Target Token Exhaustively Beforehand: Target tokens are a great indication of the future of a coin. Therefore, investors should evaluate the target maximum cap rate of an asset before investing. This investigation helps to determine whether there are any shady dealings in the coin’s mechanism.
  • Avoid Emotionally Driven Investment Decisions: Smart investment decisions are made with nerves of steel as emotional decisions rarely allow critical thinking and assessment. As such, it’s best not to invest in a coin when emotions are high.
  • Diversify Your Portfolio: Just as there are many fakes, there are also already established cryptocurrencies. Therefore, it’s advisable to spread your capital across numerous coins to avoid falling victim to crypto scams. Portfolio diversification also minimizes risk and maximizes profit. 
  • Consider an Asset’s Background Before Investment: Experts advise that investors thoroughly research a coin’s background before investing. This check helps to fish out any red flags. It’s best to invest in coins with a solid structure and trustworthy people to avoid pump-and-dump assets. 

Protect Investments From the Scam

Cryptocurrencies use very high security levels. Therefore, hackers find it almost impossible to access the network. However, like most digital operations, security defaults are mostly the users’ fault rather than the platform itself. The following suggestions will help keep your portfolio watertight. 

  • Turn On 2FA: Two-factor Authentication (2FA) is a security measure that requires hackers to break through two security levels before they can access your account. Enabling this setting for your wallets means that unauthorized people can’t access your portfolio even if they have your login keys. 
  • Be Dynamic and Creative With Passwords: In 80% – 100% of hacking cases, the account holder is guilty of poor password setup. Hackers can easily guess your likely passwords by considering key information about you. Therefore, it’s critical to form passwords creatively (not your name and date of birth) and use different ones on various sites. 
  • Restrict Cash Access: It’s necessary to restrict cash access from your crypto wallet or exchange. Doing so will ensure that an unauthorized person can’t access your real cash through your cryptocurrencies. Likewise, it’s critical to not link your bank accounts to platforms you don’t trust. 
  • Be Wary of Unrealistic Profits: There’s a saying that if it’s too good to be true, it probably isn’t. In other words, be cautious of schemes that promise unreasonable returns on your crypto investments. Some scams involve depositing an initial volume of coins to receive a higher coin volume.
  • Confirm the Authenticity of Testimonials: Digital platforms may employ people to testify in favor of their assets or simply contract writers to create fake testimonials. It’s essential to figure out if the people soliciting for a coin are real or on contract.
  • Check Out Automated Trading Apps: Legitimate automated trading platforms can help manage your portfolio better—securely and without emotion—thanks to the array of features they offer. Furthermore, platforms like Obolon9 ensure that you can execute all critical trade moves on time while assuring safety and affordability.


Various cryptocurrency scams are prevalent these days due to the absence of government control. The pump-and-dump crypto is one such scam. Fortunately, there are now various methods to protect yourself from the activities of these fraudulent scammers. Two-factor authentication and increased awareness are two helpful resources. In addition, automated trading solutions, like Obolon9, are highly recommended to minimize the risk of loss.