San Francisco magazine says all the heat surrounding Bitcoin has attracted the kind of unsavory schemers you might have once found on the trading room floor. But they're not just trying to manipulate the Bitcoin market. Their plan of attack relies on the frantic hype surrounding new varieties of "altcoins," like say Dogecoin:
Enter what we like to call the Coin Wolves, a group of cryptocurrency insiders who have begun to engage in pump and dump schemes, in which they use their community influence to artificially raise prices before selling out at the peak. The phenomenon has become common in the altcoin world. For instance, on January 28th at 1:00 pm, betacoin jumped 300% (from .00004 bitcoins to .00013 bitcoins), before crashing down to .00003 bitcoins by 1:10 pm. Some people made out pretty. Most didn't.
How do the pump and dump operations work?
There's a couple of influential guys in the world of altcoins that tell the community when a pump will occur. They tell their followers that, at a specified time in a private forum, they will reveal the name of the altcoin to be pumped. The trick is that insiders already know the coin in question, so they're buying discreet amounts of it during the hours leading up to this greater pump. When the time comes, and the altcoin is revealed to the public, there's a huge rush to buy the coin and sell at the peak. It's a pure gamble for the majority of people involved, but the guys who already owned the coin can usually make off with a comfortable profit. Even so, the whole pump and dump process only lasts about 10 minutes, and the exchange site cryptsy gets a little overloaded I think, so it gets sketchy for everyone.
It's probably not going to end well when even the schemers are sketched out.
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