By following breaking crypto news, you must be knowing all updates of cryptocurrency. Cryptocurrency has been a newbie financial concept that has become so popular among people all over the world. If you are newly introduced to the world of cryptocurrency, then you need to understand the important terminologies. Cryptocurrency might seem to excite you as it doesn’t make you bothered about the interference from any central authority like banks or even government. However, other than volatility, there are other risks involved in the cryptocurrency. If you are a newbie investor, then you must be aware of the pump and dump.
Pump and dump are the important crypto terminologies that signify a major risk for a newbie crypto investor. The term is not much known to many traders. But it is essential to upgrade your knowledge with this term. It is one of the prominent scams that target newbie investors, constantly. Now what makes this term so risky for investors, and why is it necessary to avoid! Are they really not legal? To find the answer to all these questions, read the article fully which will guide you in keeping these schemes at bay.
Understanding Pump And Dump
Just like investing in cryptocurrency is a big risk, as you are aware of the volatility factor, similarly, it is important to be aware of the pump and dump. The term signifies when the investors conspire in sprinting of an asset price. Most of the time, traders with a lack of experience fall into their trap and are duped with the scam that promises huge returns. Such scams are planned by these clever investors. And till the time one realizes the mistake, it is too late and inexperienced had to bear with huge losses.
If you are a crypto holder, then you must be knowing about this fact that cryptocurrency is a financial technology that is not supervised by any law or a central authority like banks and even government. The latest pulling off ban by the Supreme Court of India supports this real fact. But other than an advantage, it becomes a disadvantage too sometimes. We are saying this because there are manipulative investors, who take undue advantage of this crypto activity, which is not that possible with regular financial markets.
The pump and dump schemes become much operational by these scammer investors on popular social media platforms, where they target crypto projects through trolling. Now, if you want to know about how well does this trick of the pump and dump works, then let us help you in understanding that it is possible through temptation, by fooling around innocent traders to become richer. The group of misleading investors misguides them to seek the opportunity for actual investment.
You might not be well aware of the fact that the illegal practice of pump and dump is a serious crime in a country like the United States. If anyone caught red-handed with such activity, then there is a door open for the prison along with hefty fine. The need for such regulations was necessary to save innocent and unexperienced investors from the clutches of these scammer groups.
Now you see how dangerous can be these pump and dump scheme. There are some groups of investors that target which fools around innocent traders and inexperienced investors. They do this by convincing them with fake promises to make them richer soon. Till the time any trader or investor realizes the mistake, they fell into a big trap of cheating. The rising cases of this scamming activity prompted the United States to implement laws and protect the innocent traders from the clutches of scam. Now there is harsh punishment for those who are involved in carrying out such activities. So better be careful. Or else, you might have to bear with a big financial loss.