Understand the risks of pump and cryptocurrency pump and discharge schemes

The cryptocurrency world has been booming in recent years, with many new users entering the market every day. Although cryptocurrencies offer a high degree of liquidity and flexibility, they are not without risks. One of the most important threats to investors is the pump and discharge system.

What is a pump and emptying diagram?

A pump and discharge scheme is a type of fraud in securities which implies artificially inflating the price of a cryptocurrency or another financial instrument by disseminating false information on its value, which makes it more precious than it really is. The regime is based on a group of individuals to artificially inflate the price thanks to coordinated marketing, false news or other means.

How does a pump and discharge scheme work?

The pump and emptying patterns generally follow this process:

• The initial parts offer (ICO) : A company creates a new cryptocurrency and begins an ICO to collect funds from investors.

• Marketing campaign : The company is starting to market cryptocurrency via social media, e-mail campaigns and other channels, creating media threw around its value.

• Price inflation : While more and more investors buy the token, its price begins to increase rapidly, which makes it more precious than it really is.

• FAKE NEWS : False articles or publications are created to support the pump and discharge program, further inflating the price.

• DUMPING : When the price reaches a certain level, the group of people involved in the diet sells their parts at the inflated price, which lowers the price.

Risks associated with pump and emptying diagrams

While cryptocurrencies are generally considered to be a low-risk investment, pumping and discharge plans may present significant risks. Here are some potential consequences:

* Loss of funds : Investors who buy a pump and discharge program may lose their entire investment if they sell at the inflated price.

* Lose confidence in cryptocurrency : The sudden loss of value can lead investors to lose confidence in cryptocurrency, which has made them abandon or move to other investments.

* Regulatory disorders : Pumping and discharge regimes are often studied by regulatory organizations, which can consider them as a securities fraud. This can cause fines, penalties or even the program closure.

Examples of famous pump and discharges diagrams

Several schemes of high -level pumps and discharges have been exposed over the years. A notable example is the cryptocurrency investment scam of $ 1 billion, where a group of people has created false press articles and social networks to promote their cryptocurrency, Bitconnect.

Another example is the ICO 2017 scandal involving BitConnect, Coincheck and the own CEO of BitConnect, Kyubey Nakamura. The regime involved spreading false information on the value of these cryptocurrencies, artificially inflating their prices before throwing them at a loss.

How to protect yourself from pump and discharge patterns

To protect you from pump and discharge patterns:

* Do your own research : Before investing in a cryptocurrency, look carefully at the project and understand its technology, team and underlying market.

* Check the information : Beware of false press articles or messages. Check information via renowned sources before sharing it with others.

* Diversify your portfolio : Divide your investments over several cryptocurrencies to minimize the risks.

* Monitor the regulatory activity : Stay up to date on regulatory developments linked to the cryptocurrency industry.

Conclusion

Cryptocurrency is a high-risk investment, and pumping and discharge regimes are only one of the many potential risks. By understanding these programs and taking measures to protect yourself, you can make informed decisions on your investments and minimize your exposure to risks.

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