Protect Your Crypto: Understanding and Avoiding Pump-and-Dump Schemes
Pump-and-dump schemes are a significant threat in Web3, involving artificial price inflation of cryptocurrencies through misleading information to lure investors. Orchestrators then sell off holdings, causing prices to crash and leaving others with losses.
The decentralized nature of Web3, coupled with anonymity and the ease of token creation, makes the ecosystem susceptible. Platforms like Pump.fun saw over 1 million launches in 2024, providing fertile ground for manipulation.
Schemes typically involve four stages: Pre-launch (hype building), Launch (promotion and influencer involvement), Pump (spread of misleading news causing price surges), and Dump (orchestrators sell, crashing the price).
To protect yourself:
- Avoid unsolicited investment advice.
- Be wary of crypto social media ads promising unrealistic returns.
- Do your own research (DYOR) on projects, founders, and track records.
- Diversify your investments to mitigate losses.
This article does not offer investment advice. Always conduct your own research.