How Smart Money Manipulates Crypto Markets To Pump Their Bags
Case in point: The Phony Walmart — Litecoin Partnership
The unregulated nature of Crypto makes it the freest market we’ve ever had, but one thing is certain. This market is full of predators and if you don’t watch your own back, you’ll get rekt.
Even worse, you won’t find a desk anywhere to file a complaint.
But, I have some good news. You can educate yourself about some of the less talked about aspects of this market. And that’s market manipulation.
Crypto markets can be manipulated in various ways but the common weapon of choice for those involved is rug pulls and pump ’n’ dump schemes.
Let’s start with an example.
On September 13, Litecoin Foundation shared a press release on Twitter alluding that Walmart would start accepting Litecoin for payments. The press release was immediately shared by all the major global news outlets and wires.
The result?
LTC saw an immediate pump from about $175 per token to $236 within a 30 minutes time frame.
It wasn’t until 30 minutes later that it dawned on everyone, including Litecoin Foundation, that all this was a hoax. LTC fell back to the original price, instantly.
Other than the Litecoin Foundation issuing a lame explanation that their Twitter account had been hacked, we may never really know what actually transpired.
But as you read along, you will learn that such pump and dump schemes are meticulously planned and a guy hacking a Twitter account is just part of a well organized syndicate.
Pump ’n’ Dump
If you ever see anyone hyping a low cap crypto token on Twitter, or anywhere on the internet, it’s probably part of a pump ’n’ dump syndicate and it’s safer to treat it as such.
Pump and dump syndicates are started by a mastermind who knows where to source the right people to handle different tasks. This guy then onboards a group of individuals (who have a lot of capital to deploy) in a private group on Telegram.
The same plot could also be unrolled by a full service company acting on behalf of blue chip clients like hedge funds. Typically, such firms specialize in over-the-counter (OTC) or off-exchange trading and also have talent in solidity development, marketing & public relations, legal and regulatory.
Simply put, all the tools needed for the smart money to enter or exit any trade with maximum returns.
- Solidity developers — for deploying exchange trading bots. Bots are programmed to be more decisive in trading which makes them efficient in pumping out those shitcoins you all love. For those who don’t know, solidity is the programming language for assembling smart contracts utilized in the Ethereum blockchain.
- Marketing & PR — Laying the groundwork for FUD.
- OTC — For finalizing large deals enough to start controlling order books.
The Plot
So, say you want to buy Bitcoin but feel you missed the optimal entry. If only there was a dip you could enter in. A hedge fund, a.k.a. smart money sees this problem differently.
Why not just crash the markets and scoop up cheap sats?
This is where the guys mentioned above come in.
The Groundwork
Marketing & PR push FUD and bearish news which is published by low tier media outlets and blogs with a large following. Ofcourse, these actors are paid.
As the initial FUD begins to gain steam, more FUD is pushed to major outlets like Reuters, Bloomberg, Forbes etc. Contributors to the outlets typically publish hot takes on whatever saga there is. Soon the story has gained momentum and sounds legit.
Now it’s time to onboard influencers on Crypto Twitter. All these guys tweet out the story or variants of it with key words that sentiment algorithms pick such as “ban”, “hack”, “partnership” etc.
When you think about it, the Litecoin Pump and Dump that was cited above seems to have unrolled the procedure all at once.
Results
It’s now time to tie it all together by initiating the dump via the trading bot. These bots simply look for the thinnest books on exchanges (CoinBase, Binance, Kraken, Gemini etc) and market dumps on them.
Why specifically target thin books?
Thinly traded securities are exchanged in low volumes and often have limited numbers of interested buyers and sellers, which can lead to volatile changes in price when a transaction occurs. ~Investopedia
Now, this is where you and I get involved.
When people see the dump, they rush to Twitter to find that everyone is engrossed in the new story. They panic and as they rush on exchanges to sell, the bots start to dump, cascading even more stop losses, and liquidations begin.
And just like that, smart money gets the entry they wanted.
In the case of Litecoin, positive news was used to drive prices up so that someone could get the perfect exit.
This article will help you understand how individuals are able to amass the same logistics as smart money and execute successful pump ’n’ dumps. It contains a long thread of messages between individuals who were exposed by an infiltrator.
Read part 2 of the series where we explore the mind of a scammer and how to avoid rug pulls.
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