Is Bitcoin a “pump and dump” scheme?

Last Updated: April 22, 2018 at 9:51 PM EST

Bitcoin as a Cryptocurrency

Like most cryptocurrencies, Bitcoin is a prime target for schemes that target the unwary. However, that does not mean that it is easy to use to fraud. The reason why some people are afraid to invest in it is because it is not actual money or something tangible that they can feel and see. So, to them there is nothing stopping those who can inflate its price and get away with it. However, that is easier said than done as far as this cryptocurrency is concerned.

These are known as pump and dump schemes and these comprise of 2 groups of people. The former comprises of people who increase the price of the currency by pushing it or promoting it on the online markets. These people spend their time locating cheap currencies which they then purchase and dump after they have created a buzz around them.

Depending on the currency being used, this process can take minutes or hours to complete. The main aim is to create a buying mindset that would see them selling that currency in bulk. In other words, they are both pumpers and dumpers.
The buzz that is created is used to increase trading volume which increases the value of the coins. Once the desired price limit is met, they sell the coins for a steal. Some people might panic and dump the coins prematurely which doesn’t get them the values they need.

This is not possible with Bitcoins as such. To understand this, you have to understand pump and dump schemes comprehensively. This scheme creates buying patterns which is dependent on the value of the currency being used. As the price goes up the players involved load up on cheap coins and sell them for a hefty price.

The players use a number of different accounts to discuss their coin of choice and they may involve others to spread the word. The currency will be talked up on forums and social media and once they create a buzz, they will cash in by selling the currency for a high price. Once the trading platforms get in on the action, the price gets higher which in turn creates more buzz.

How Bitcoin is different

Bitcoin currency exchange is not a deliberate pump and dump scheme though. The activities around this currency’s market make it seem so. Just like any other commodity, the value of bitcoins is determined by market dynamics which can change any time around its trading activities. In other words, no one can tell when this currency’s value might rise or fall.

The price might remain stable or it may rise or fall like stock prices in Forex. Yes, it might go down some time but it cannot be used to dump or dupe people who own it. So, if you want to invest in this cryptocurrency, researching the current market beforehand is a good idea.