Snapshot
- A Pump and Dump Scheme took place in the YOYO/BTC pair in December 2020.
- The accounts of the perpetrators have been frozen and all the funds have been sealed.
- CoinDCX has described the entire incident in detail, hoping to educate all the members of the crypto community about such malicious activities and how to prevent being its victim.
Pump and Dump schemes are one of the most common cryptocurrency scams that all cryptocurrency traders must be aware of. In our recent post, we discussed this scheme in detail and how cryptocurrency traders can identify such schemes.
CoinDCX had also reported an incident of a pump and dump where the price of a low market cap and illiquid token named YOYO/BTC’s price was pumped for no reason. CoinDCX ran a thorough investigation of this incident to find out each and every detail. We want all our users to be aware of such incidents and protect themselves from the potential pumps and dumps in future.
After a few days of rise in price, the token was dumped by the scammers. Many novice traders who took leveraged positions on this pair lost their funds due to the liquidation of their margin trades. Considering the fact that many traders were going to face losses, the margin trades were liquidated after CoinDCX’s automated system identified this pump and dump scheme.
While the accounts of the scammers involved in the pump and dump scheme have been frozen and their funds sealed, we have decided to explain to you all how this entire scam was conducted in order to avoid such schemes in the future.
The Incident
At the time of writing, YOYO’s market capitalization is at $4,442,580 which ranks it at 827 among other cryptocurrencies. Considering the low market capitalization and the low trading volume, it is evident that the market for YOYO can be highly volatile and can be easily manipulated as seen in the image below.
In a matter of 6 days (December 10, 2020, to December 15, 2020), the price of the YOYO/BTC pair shot up by 130% and all this happened because few scammers could very successfully convince traders on CoinDCX’s Telegram Channel to invest in it. Let’s see how –
A member of our community named “The Bella” started promoting YOYO from December 5 onwards where they shared technical information/oscillators showing that it was a good time to buy YOYO.
It was on December 6 they started suggesting YOYO as an active investment option, with easy 50% gains in YOYO. Other users backed “The Bella”, some with intent and some with sarcasm. They mentioned that YOYO was going to see a huge pump and it was the right time to buy the token. Despite the fall in the price of the token, “The Bella” was highly bullish.
The price started pumping on December 10, 2020, and it kept pumping till December 15, 2020. With people starting to believe in “The Bella’s” analysis, the price kept rising as more traders entered the market to make quick money. Many even entered on margin to earn more money.
With YOYO/BTC price approaching 0.00000116, there was already FOMO in the market. People who entered the market had already seen profits. Since December 10, 2020, the price of the crypto pair had already risen by 128% and trading volume was rising and the market became very bullish on the price of the crypto pair.
The price of the pair fell from 114 sats to 71 sats, a 37% drop, on December 16 and this is when most margin trades got liquidated. CoinDCX’s automated system liquidated many active orders as soon as the pump and dump scheme was detected. This was done to minimize the loss that all the traders have faced after entering the market.
What Should You Do To Prevent Such Schemes?
We have always strived to protect the funds of our users. From running security campaigns to adding new security features and adding dynamic algorithms to our Margin product, we have tried our best.
Pump and Dump schemes are highly difficult to prevent from an exchange’s position as this may question an investor’s freedom on trading on a token pair. However, we have taken strong measures to prevent such schemes and take immediate actions when spotted. The current Bitcoin and Ethereum rally brought many new traders on board and existing traders on cryptocurrency exchanges tried to maximize their gains by trading in cryptocurrencies which were shilled on platforms like Telegram or Discord or even Twitter. All the users, whether new or experienced with crypto-trading need to be aware and alert of such activities.
As a responsible trader, you must always Do Your Own Research (DYOR) about the project and the reason behind the possible price rise and fall. Before investing in cryptocurrencies with low trading volume and market capitalization, it is extensively imperative to research thoroughly about the projects, their team, investor backing, technicals, and fundamentals. Never believe in something that sounds too good to be true. Tokens with low price and illiquid markets tend to be very volatile and these are the markets that scammers target. You can invest in any cryptocurrency of your choice but never invest in any of them blindly.
