There have been con-men and crooks in investing since the beginning. One of the most common scams, as you see in movies like the cult classic ‘Boiler Room,’ is the “pump and dump.” Unscrupulous players run around hyping up an investment, selling it and its sudden rise to anybody who will listen, and when the hype and price are at a maximum, they unload their investment and leave the suckers to clean up the mess. Altcoins, like any investment, are not immune to pump and dump schemes.
Spotting the signs of a pump and dump, whether it is an altcoin or literally almost anything else you can sell for a profit, is fairly simple. If an investment has guarantees of big profits, if it has a long history of not going anywhere and then suddenly goes through the roof, if trading volume is low and suddenly inflates, or if the company behind the altcoin is buying coins up to limit supply, then you have to at least stop and consider the possibility of a pump and dump.
The problem, of course, is that altcoins do not generally have much of a history, and they tend to rise in value quickly depending on the support of certain groups of investors. Even bitcoin has had a shorter life than most stocks. That makes the line between a pump and dump and just an altcoin that was overheated in the first place a bit thin and blurry. Always do your research before you buy. Your wallet will thank you.
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