“Avoiding Pump-and-Dumps” (Article for OpenPool)
Staying Informed Through Uncertainty
The recent events involving FTX and its investors’ funds have left some retail investors confused and concerned in the aftermath. While the emerging industry totes the financial freedom of a decentralized economy, many felt the double-edged nature of a system operating outside traditional regulations. This can be daunting to veteran crypto traders and newbies alike, how do you know if you’re making a good investment?
Individual research is paramount when making any financial decisions—crypto is no different. Investors have a responsibility to themselves to be vigilant regarding market activity and the nature of the tokens they’re interested in, taking dozens of variables into account before a transaction. With crypto becoming more and more mainstream every day, thousands of scams and fraud attempts have exploded into the market, creating confusion and disheartening investors.
One common threat to keep an eye out for is known as a “pump-and-dump” scheme; a fraudulent investment tactic where a group or individual promotes a cryptocurrency to drive up its price and then sells it at an inflated level for a profit. Typically, pump-and-dump schemes use social media and online forums to promote a particular cryptocurrency, leading to a sudden influx of buzz around a token that has no notable value.
How else can you spot a pump-and-dump scheme? Here are a few tips:
Be wary of tokens with low trading volume as they are more easily manipulated.
Look for red flags such as manufactured news, exaggerated claims, and “shill” groups on social media.
Check the team behind the token; any unknown or unqualified individuals in the crypto community should be avoided.
Do your own research.
When checking a token's whitepaper, study its technology and use cases, and analyze its developer team and community. Doing so will raise initial confidence in the token and facilitate easier monitoring of the asset in the future. In addition, it's a good idea to avoid investing large amounts of money in any cryptocurrency that you don't fully understand or that seems too good to be true.
Knowledge is Power
Doing your own research doesn’t have to be difficult. Self-custody comes with freedom and cryptocurrencies allow users to manage their assets with more agility, however, the due diligence is in the eye of the beholder unlike ever before. And that’s where we come in. OpenPool is a new Ethereum-based wallet dashboard that goes beyond simple wallet data, helping investors detect probable impacts on their portfolio, and in the process, uncover actionable investment opportunities.
With OpenPool, investors can monitor tailored news and developer activity that is associated with each individual’s holdings. The Developer Signal tool saves users’ time in their research by offering a platform to review all pertinent updates and news in one place. By creating a custom “news net” to capture specific information for each client and their assets, OpenPool is an incredibly useful instrument for keeping track of the market.
Overall, the key to avoiding pump-and-dump schemes and other fraudulent activity is to be vigilant and do your own research before investing in any cryptocurrency. By using tools like OpenPool's Developer Signal and dashboard, you can easily track and monitor your digital assets and stay up-to-date on the latest news and developments in the blockchain world.
Join today to gain confidence in your portfolio and peace of mind in your investments.
