Bittrex Issues a Warning About Cryptocurrency Pump and Dumps

Pump and dumps, which have long been synonymous with cryptocurrency markets, are facing a clampdown. Bittrex has emphasized its determination to combat the practice, which persists on several exchanges. In an update to its terms of service, Bittrex reiterated that it takes a dim view of pump and dump schemes, and will suspend accounts found to have been participating in such activity.

What Goes Up…

Pump and dumps were around long before cryptocurrency – and indeed the internet – became a thing. They can be traced back to the stock markets, as immortalized in Jordan Belfort’s penny stocks scene from The Wolf of Wall Street.

In the altcoin era, there are mainly two forms these controversial schemes take:

Fake News: Using message boards, social media, and blogs, a particular cryptocoin is hyped and shilled, sometimes with screenshots of fake news regarding new platform developments, exchange listings, and mainstream partnerships. The aim is to get buyers to snap up the coins, thereby inflating their price before buyers who got in early can dump their holdings and perform a sharp exit. This behavior can take place over a period of hours, days, or weeks.

Flash Pumps: The other principal pump and dump involves members of a closed group who are all in on the scam. When the name of the coin to be pumped is announced, it’s a race to buy in and then dump it on the stragglers before they in turn do the same with buyers who come after them. It’s essentially a game of chicken: a contest to see who’ll blink first and offload their holdings. A huge vertical green candle followed by a corresponding red one characterizes flash pumps, which can rally and crash in a matter of minutes…

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