[00:00] The cryptocurrency world is a volatile one, but&nbsp; one rollercoaster you don’t want to get caught on&nbsp;&nbsp; is a pump-and-dump. Fortunately, pump-and-dump&nbsp; schemes have telltale signs that make them&nbsp;&nbsp;
[00:12] relatively easy to spot. In this video, we’ll&nbsp; show you how to identify a pump-and-dump in&nbsp;&nbsp; cryptocurrency, so you can avoid being blindsided. Pump-and-dump schemes are when people work&nbsp;&nbsp;
[00:25] together to inflate the price of a&nbsp; low-value cryptocurrency or token&nbsp;&nbsp; by buying en masse at the same time, waiting&nbsp; for other unsuspecting investors to FOMO into&nbsp;&nbsp;
[00:37] the asset, and then selling their positions&nbsp; when the price rises to a certain level. Pump-and-dump schemes in the tradfi world are&nbsp; illegal, but since most cryptos are unregulated,&nbsp;&nbsp; crypto pump-and-dump schemes operate in a legal&nbsp; gray area. They are morally dubious, to say the&nbsp;&nbsp;
[00:55] least, as they rely on deceiving unsuspecting&nbsp; buyers and using them as exit liquidity.&nbsp; This type of scam starts off with a “pump”&nbsp; phase when large holders of an asset,&nbsp;&nbsp; such as project developers or early investors,&nbsp; hype up the project, often with exaggerated&nbsp;&nbsp;
[01:12] claims and promises of riches on social&nbsp; media platforms like Twitter, Youtube,&nbsp;&nbsp; or Telegram. With time, more and more people&nbsp; buy the asset, causing its price to skyrocket.&nbsp; What follows is called the “dump” phase, where&nbsp; the original investors liquidate their holdings&nbsp;&nbsp;
[01:28] as soon as the asset reaches a certain&nbsp; price and run off with huge profits. The&nbsp;&nbsp; “dump” phase usually happens fast, with&nbsp; the asset’s price falling significantly,&nbsp;&nbsp; leaving those who got in late with no choice but&nbsp; to sell as well and wind up taking heavy losses or&nbsp;&nbsp;
[01:44] having their holdings go essentially to zero. A recent pump-and-dump example can be seen on&nbsp;&nbsp; the altcoin SONM, an old 2017 project that&nbsp; offers cloud services and other hardware.
[01:56] On November 20th, the SONM token surged by almost&nbsp; 7,000%, hitting a new record high of $13.9, after&nbsp;&nbsp; which a vicious market sell-off ensued the next&nbsp; day, collapsing the price by over 90% to $1.03.&nbsp;
[02:13] And while some were able to get off early, others&nbsp; weren’t so lucky, which is why you should always&nbsp;&nbsp; be on the lookout for obvious red flags. Like&nbsp; if a cryptocurrency is suddenly getting a lot&nbsp;&nbsp;
[02:25] of attention on social media especially via bots,&nbsp; or is being shilled endlessly by celebrities or&nbsp;&nbsp; influencers. The assets in question often&nbsp; have low liquidity or are from obscure or&nbsp;&nbsp;
[02:38] ‘zombie’ projects most people have never heard&nbsp; about. Sometimes these pump-and-dumps are not&nbsp;&nbsp; orchestrated by the project itself but simply&nbsp; targeted by pump-and-dump groups. Most of all,&nbsp;&nbsp; sudden and massive price hikes of up to&nbsp; hundreds or thousands of percent are almost&nbsp;&nbsp;
[02:55] always good indicators of a pump-and-dump&nbsp; so this is a good enough sign to stay away. At the end of the day, the best way to protect&nbsp; yourself from financial risk is to take no&nbsp;&nbsp; shortcuts, DYOR, and don’t participate in&nbsp; anything that sounds too good to be true.