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In the digital age where everything “becomes a trend” on social media, many celebrities and influencers have been investing and promoting cryptocurrencies, creating a true “FOMO” about crypto assets.
However, it is necessary to be careful, because it is not always safe to trust these indications. There are already several cases of cryptocurrencies that were overvalued because they were supported by celebrities and soon after suffered catastrophic drops.
What are cryptocurrency pump-and-dumps?
Cryptocurrency pump-and-dumps are when people use misleading information to increase the price of a cryptocurrency and then sell it, guaranteeing only their profit.
This same term is used when a coin’s founders, contributors or a group of traders spread misleading information to inflate the value of an asset, only to later sell the shares for exorbitant amounts.
How to avoid cryptocurrency frauds?
It is very common for people to fall for scams, especially in an unregulated market, such as digital assets. However, there are some preventive measures to avoid cryptocurrency frauds.
1 – Beware of relatively unknown cryptocurrencies being released on the internet. Always research the token, read the white paper before making any investment.
2 – Know the project, understand its purpose and what benefits it brings. Projects that don’t have a clear purpose or real benefits should be a red flag for you.
3 – Famous people start talking constantly about a cryptocurrency should be a warning sign for you, this will not always be a great investment.
4 – Be wary of recent and sudden increases, cryptocurrencies are highly volatile.
Did you like what was discussed here? We suggest that you also read this other text Top 10 Cryptocurrencies that are Expected to Grow in 2022.