It’s no secret that the Pump & Dump is illegal in the stock market. This is where some influential party buys a ton of some low-valued stock, then uses their influence to spread a deceptive message that it’s about to go ballistic. Suckers all follow the advice and buy the stock, sending its price up; at which point the conspirator sells his initial investment for a large profit. It’s a common form of market manipulation. One place you see it happen a lot is stock trading clubs, where a prominent club member whose trading secrets are well respected is one day “persuaded” to “leak” which stock he bought that morning. His reputation sends everyone following his move; he sells later that afternoon and cleans up. The SEC sends people to jail for this every day.
In the world of crypto, however, it’s another matter. Cryptocurrencies are generally not considered securities, and so are not subject to SEC regulation. Thus they’ve gained a reputation for being quite the Wild West when it comes to the Pump & Dump. The man best known for this, of course, is Elon Musk. His has a massive captive audience of fanbois who will follow his every move. At various times he has announced that Tesla cars can be bought with a certain cryptocurrency, sending their value skyrocketing. Of course, it was a Pump & Dump. He had (presumably) personally purchased massive amounts of the coin before the announcement, sold them after the price rise, and then Tesla reverted their policy because there was no longer any need. He’s done this once with Bitcoin, and again with Dogecoin.
You can escape the SEC, but you can’t escape aggrieved investors. Musk is currently being sued for $258 billion for his past manipulation with Dogecoin.
In case you thought he was done with that, witness his acquisition of Twitter. As of this writing, the Twitter logo on the website has been replaced with that of Dogecoin, causing an immediate spike in its price. Let’s see if we can guess why he did that — beyond the obvious toying with the plaintiffs that we’ve come to expect from him.
The question is, should you immediately buy Dogecoin? The short answer is definitely not. People who got in very early, like within minutes of the logo appearing, might well be able to make a small profit, if they sell quickly enough. But everyone after that will be buying at an already-inflated price; and assuming that Elon follows standard Pump & Dump protocol, when he dumps his (presumably) massive hoard, the price will plummet virtually instantly, and all the fanbois who bought a day or two after logo went live will lose big time. So, don’t.
At best, crypto trading is gambling with an ante paid to the exchanges, and the house always wins over time. At worst, crypto is a great way to lose a lot of money fast to the predators.
By way of disclaimer, I should also point out that I use Twitter all day. It’s still by far the most active and relevant social media tool for professional communicators like me. If they ever tell me I have to pay to keep my legacy blue check (which they haven’t yet) I probably will, as it’s a valuable communication tool for me and for Skeptoid Media. But I don’t plan to play its Dogecoin game.