Educating oneself about the cryptocurrency ecosystem is crucial for investors to follow through a bear market while waiting for a bullish cycle. However, having a good understanding of investing in cryptocurrencies necessitates watching for fraudulent projects that threaten to drain assets overnight, such as pumping and dumping schemes.

Cryptocurrency pumping and dumping is an orchestrated scam that involves misleading investors into buying artificially inflated tokens – usually marketed by paying celebrities and social influencers. The SafeMoon symbol is one of the most prominent examples of an alleged pump-and-dump scheme featuring A-list celebrities, including Nick Carter, Soulja Boy, Lil Yachty, and YouTubers Jake Paul and Ben Phillips.

As soon as investors buy tokens at inflated prices, the people who own the largest pile of tokens are sold off, leading to an immediate crash in the price of the token. While fraudsters hide their pump-and-dumping schemes under the pretext of creating the next batch of crypto-millionaires, informed investors have the upper hand in identifying and avoiding their involvement.

Pumping and dumping schemes are usually accompanied by false promises about three broad categories – solving real-world use cases, guaranteed exorbitant returns, and unfettered support from celebrities and influencers.

The long-term success of a cryptocurrency largely depends on the use cases it serves. As a result, people who support pump and dump projects are often enough to share by highlighting the use cases that the token is intended to serve. In addition, these schemes usually acquire celebrities through cash advances and internal project tokens.

Celebrities then market fraudulent codes to their trusted fans, usually with promises of high investment returns. In the case of SafeMoon, celebrities have been accused of pulling the rug out, indicating slow sales of collectibles as turnover from retail investors has remained inflated.

Binance, the largest crypto exchange by trading volume, has also warned investors not to take investment advice from celebrities and influencers.

In the next bull cycle, traditional and crypto investors around the world will step up their efforts to recoup losses from the ongoing bear market. Knowing this information, scammers will try to find opportunities to deceive unwary investors by offering unrealistic gains. As a result, do your own research (DYOR) as one of the best crypto tips.

RELATED: Sygnia CEO Slams Elon Musk for Alleged Bitcoin Pump and Offloading

Elon Musk was recently accused of manipulating cryptocurrency prices by South African billionaire businesswoman Magda Wirzeka.

Wierzycka believes that Musk’s social media activity and its effects on the price of Bitcoin (BTC) should have made it the subject of an investigation by the US Securities and Exchange Commission. She believes that Musk intentionally raised the price of bitcoin via tweets, including one that mentions Tesla’s $1.5 billion purchase of BTC, and then “sold a significant portion of his exposure at the peak.”

Source: CoinTelegraph