UniFarm Conclave: Defining & Detecting Crypto Pump & Dump
While the cryptocurrency market was growing exponentially, several news stories hinted at anonymous accounts of schemes to manipulate crypto trading via pump-and-dump schemes. The Wall Street Journal’s report provides definitive proof of it. The report provides an inside look at the operations of pump-and-dump schemes.
Pump-and-dump cryptocurrency schemes take advantage of individuals while making a lot of money for the crooks. They could include social media influencers who are paid to encourage people to buy a certain digital coin in order to boost its value. When the value of the coins rises, the scammers and influencers sell them and pocket the profits, while the rest of us lose money on our investments.
Since the topic concerns everyone, we invited 5 guests to shed some light on the topic to educate our audience on how to be on the safer side.
Meet Our Speakers
|Ritam Gupta||CEO & Founder, DeFi11|
|Pankaj Shukla||Marketing Manager, Razor Network|
|Manu Chaudhary||CEO, DeFinity|
|Ryan White||CEO, SokuSwap|
|Sainath Gupta||CEO, Knit Finance|
|Tarusha Mittal||Co-founder, UniFarm|
Topic of Discussion
“Defining and Detecting Cryptocurrency Pump-and-Dumps”
Let’s go deep into the discussion.
Q1. What are your views on the Pump-and-dump culture in the Crypto ecosystem?
Ryan White – SokuSwap
My opinion on the topic is that this is something that people do to make money. And, it’s more about what people do to make money quickly and easily. This is human nature. There are facts of life and people need to understand these facts in business, especially if you’re in this industry, whether you’re an investor or a founder of a business. It’s something that happens very frequently.
Manu Chaudhary – DeFinity
Firstly, I think a lot of this is about education. If you look at the cryptoverse, the majority of people, by volume, are retail traders. Typically, they’ve never traded any other asset classes. Their first trip into the world is trading the most volatile asset class in the world. So I think these create challenges and make it very difficult for people to really understand how to trade these markets in the first instance.
Secondly, crypto market is very new. The market is very liquid and they’re prone to manipulation. I think the culture is not great. Also, it’s not really that different from the early days of the equity markets which saw similar things.
So I think there’re two things that need to happen fundamentally –
- People need to understand the metrics of the actual business that they’re looking to get exposure to.
- If you have long-term belief in objectives and the goals of that business and you have belief in the team that’s creating this vision and executing things, then that is basically the reason to huddle.
People who want to ask questions like “when Lambo?” are in this for the wrong reasons. They’re probably going to be impacting and influencing how this ecosystem evolves over the next 5 to 10 years.
We’re so early in the process. This is just the beginning. I say that because, in 2017, I was telling my friends about how awesome Bitcoin was. At that time, they had no clue about it. In the same way, when I talk to the same people, now they tell me about their crypto portfolios. But they’ve no idea about what DeFi (Decentralized Finance) is.
It’s the process, I think, we all go through. Eventually, I think, this will normalize and we won’t see these kinds of cultures continue.
Tarusha Mittal – UniFarm
It’s really valuable to see how crypto and blockchain are solving so many problems that we face in our daily lives. I believe the potential here is obviously immense.
At the same time, I do understand that users need to be aware of these pump-and-dump schemes. It’s part and parcel of any sector in its infancy. Especially, when it’s growing so much. There’ll be some bad artists and then there’ll others who’re actually trying to solve the problem.
You just need to do your own research. You need to get the information from the right sources to make sure that you’re doing what is right in the long term.
Pankaj Shukla – Razor Network
Pump and dump is not a new thing. It’s a play of fear and greed which has been there for a long time. The first-ever pump-and-dump scheme that was recorded in history was “The South Sea Bubble”. It was in the 18th century, where a company called “South Sea Company” was created to pay back the debt that Great Britain was in at that time. How they sold this company to the creditors was that this company holds the monopoly rights to trade slaves in central and southern America, saying that it would make great profits in the future.
Just looking at this promise, creditors were ready to buy shares of this company. All of them sustained huge losses.
Similarly in the cyrpto space, the false good news is created and spread across the internet.
So I would advise people not just fall for the false news. Instead, practice these before investing into a project:
- Read the project’s whitepaper, end-to-end.
- Make sure that the team actually exists.
- The amount of experience the team members has.
- Do a fundamental analysis.
Sainath Gupta – Knit Finance
Most importantly, what we all have to remember is that crypto space is active 24*7. This can be one reason for a lot of craziness to happen. It’s also referred to as “Madness of Masses”. Too much craze about something is also an issue. You have to figure out many of these projects are run by people who’re not mature enough to run a company in the long term.
These Pump & Dump schemes are generally of this sort, where people like to be rich quick.
The way to avoid ourselves to fall for these traps can be to ensure that people who are running the show should be mature enough.
Some part of the news is definitely manipulated, and people need to do research about it. Otherwise, they’ll have to give up their hard earn money.
Q2. How does the circulation supply of a token impact its value, and what methods can be used to suck the circulation supply from the market?
Ryan White – SokuSwap
People extract tokens and get rid of them by burning them. That’s the big thing that people do nowadays because they want to attract investors. Investors like fewer tokens because crypto is based on supply and demand and hype sentiment. People buy the token, and the price goes up. They sell, then the price goes down.
Thus, total supply is a major thing. You must’ve seen that there’s a phenomenon going on right now ever since safemoon started off, where projects are printing up quadrillions of tokens or a hundred quadrillion tokens and setting their price at sub-penny. They get people to buy $2 of tokens, and people do so hoping that the token price will hit this price. They put a blind eye to the token supply which hurts them later on.
So, it’s a lack of knowledge right now, and people need to pay attention to it.
Manu Chaudhary – DeFinity
I totally agree with Ryan. One of the best things you can do is to essentially buy and then burn tokens and then reduce the total supply of the token out there.
I believe that deflation is a very powerful thing since it encourages people that are currently heartless to keep on modeling for a bit longer. The other thing, of course, is encouraging to stake, which is pretty pivotal. Those who have belief in the project and belief in the management team to be rewarded for having that belief and reducing the total circulating supply at any given time which creates a flow in the price of a given token. It even helps stabilize the volatility that we usually see for the tokens that had less than a year or two years of life.
Tarusha Mittal – UniFarm
Ryan and Manu covered it very beautifully that it’s very appalling when people start businesses with no vision. They’re generally looking for short-term gain, and this doesn’t do any good to the ecosystem. As a founder, if you’re designing tokenomics, you have to create a breathable economy. It needs to inflate as well as contract. There’re mechanisms like burning the tokens, buying them back and locking them up in the company’s treasury.
UniFarm works in the same way. We try to remove some liquidity away from the market and lock-in a certain quantum of the tokens in these farms.
Essentially, you have to make the vision right.
Watch The Full Session
UniFarm is a one-of-a-kind staking solution where the best projects in DeFi space come together to provide value to investors. UniFarm allows you to stake one token but earn multiple high-value tokens, so in addition to a great APY, your returns are automatically diversified as well.