Hundreds of millions of people invest in cryptocurrencies. That’s a big audience for scammers to target, so it’s no surprise that the crypto world is, unfortunately, rife with malicious tricks and schemes, like the famous “pump and dump” scam technique.
This guide looks at how pump and dump crypto scams work and how to spot them so you don’t become a victim.
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How Do Pump and Dump Crypto Scams Work?
A pump and dump scam is when one or more scammers contrive to artificially inflate the price of a cryptocurrency token or other digital asset. They invest in a large amount of the asset to push the price higher and then use various techniques – like aggressive marketing campaigns or spreading fake and exaggerated claims on social media sites – to attract attention and investors.
Then, once the price has reached a certain point, the scammers simply cash out, selling off their portion of the asset to buyers. Since they held so much of it in the first place, the value suddenly plummets after their sale.
In the aftermath, all the victims who were fooled by the scammers are left with an often near-worthless asset and possibly major losses in their own financial portfolios. It’s a very common scam technique and it works primarily on the principle of FOMO or “Fear of Missing Out” – the scammers make people think they need to invest or they’ll be missing out on a major money-making opportunity.
Signs of Pump and Dump Crypto Scams
Sign 1. Too Good to Be True Claims
A lot of pump and dump scams rely on claims that are exaggerated or too good to be true to try and create that “FOMO” feeling among the audience. The scammers might claim that their coin or asset is set to become “the next Bitcoin,” for example, or that its price is due to rise by hundreds or even thousands of percentage points by the end of the year, promising huge returns for any investors.
Sign 2. Sudden or Unrealistic Price Spikes and High Trading Volume
In this popular scheme, a scammer, or more usually a group or network of scammers, will first buy up large amounts of an asset to drive its price up. You can usually identify this by checking the price trends and charts of the asset in question. It might have had low value or activity for months, and then suddenly skyrockets, with tons of investment out of the blue.
Sign 3. Generic Articles or Social Media Posts Hyping Up a Particular Asset
To get people investing in their assets, pump and dump scammers often create blogs, articles, or social media posts about them. They sometimes even use AI to write these articles – much of the language can read as generic or repetitive. It may make unrealistic claims, saying that one particular asset is about to have a huge rise in value, without any clear explanation of why.
Sign 4. Low Market Capitalization
Another warning sign to watch for is low market capitalization, which refers to the total value of the asset or token in question. Pump and dump scams almost always focus on coins with low capitalization, because their prices are much easier to manipulate. That doesn’t mean all coins with low capitalization are scams, but you should be wary about investing in them.
Sign 5. Lack of Transparency or Logic
Lastly, perhaps one of the most obvious signs of a pump and dump scam is when there’s very little transparency or documentation behind a cryptocurrency or asset. You may not be able to tell exactly what the cryptocurrency is, who created it, what it’s used for, or why it would suddenly experience such a price surge. Scammers keep all of this information vague and inaccessible so users have a harder time separating scams from real investments.
How to Protect Yourself From Pump and Dump Scams
- Be very cautious when investing in any kind of crypto or digital assets.
- Be wary of coins or crypto projects you’ve never heard of or can find little info about.
- Look at the price and trade history of coins to spot spikes or unusual activity.
- Don’t trust random articles or social posts that seem to be inexplicably hyping up one particular cryptocurrency.
- Don’t fall victim to FOMO.
Report the Scam
You can report pump and dumps or other crypto scams to the authorities including:
- Report to the FTC
- Report to the FBI Internet Complaints Center
How to Protect Yourself More
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Read more about other kinds of crypto scams, like Bitcoin scams so you know how to avoid them.

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