Note: This is intended to help newcomers to the crypto world not to fall for scams, not to discredit any particular coin.
One of the best things about Steemit is that is has attracted a lot of newcomers to the world of cryptocurrencies.
However, I hope this surge in interest for cryptos does not lead to a new wave of altcoin-scams.
Having been actively involved in cryptocurrency since 2012, I have seen my fair share of 'Sorry for your loss' - the motto of a satiric subreddit /r/buttcoin mocking the colourful scams that have not ceased to plague crypto communities since late 2013.
These principally include coin pump and dumps.
Of course the more lucrative coin price manipulations are far more sophisticated and nuanced, and are orchestrated by skilled programmers, who would do the same thing on stock exchanges and futures markets if not constrained by regulation. (e.g. algorithmic spoofing and wash trades are observably rampant on several crypto exchanges).
Nevertheless, the largest SFYL events are crafted with little more than social engineering which runs on the fuel of deceptive abstraction.
I will avoid naming coins as I believe it would not be appropriate, but surfing through old 'bitcointalk' threads should provide you with a lot of information.
- Whitepapers can contain no more than good ideas
The best Ponzicoins had impressive, well written whitepapers with insightful crypto-economic reflection.
All mentioning potential industries that the coins would monopolize due to its novel efficiency.
To summarize, all coins held the promise of extraordinary enrichment for early adopters.
What happened?
As soon as a month after initial coin offerings, when the market cap of the heavily premined coins reached several hundred thousand to mid millions, dumps miraculously appeared.
And Joe Bloggs who placed his pension fund in WorldChangingCoin2016 was made whole only with the soothing words "Sorry for your loss".
How did this happen?
For all their flaws, Ponzicoins employ impressive marketing.
From well designed threads on popular crypto forums, to (probably paid) posts on every notable coin magazine, to high definition explainer videos with attractive, welcoming women.
And last but not least: crypto-Christ-like figures who foment Euphoria in crypto communities that spreads like the black plague.
During the months after the ICO, projections of a world where all hospitals use HospitalCoin to charge their patients are inculcated into the coin holders' minds, all social network is infested with positive news reports on the coin and its solid development team, and you will find no significant dissent.
And like flies on turds, these coin scams attract non-affiliated wholly independent pumpers to fan the flame of euphoria.
Do not mistake these members for excited fellow coin holders!
They tend to have a bizarre fixation with 'going to the moon'...?
Then something catastrophic will happen.
"wallets stopped working!", or "the blockchain got DDoS'd!", or "we've been hacked!", or simply nothing, and miraculously you'll find bid walls crumble, and the coin is being hard sold to the toilet.
Sorry for your loss Joe Bloggs, perhaps consider investing in BakeryCoin? It'll revolutionize the way your Apple Strudel is served!
What point am I trying to make?
I honestly believe Steem devs to be legitimate, considering there have been several exit opportunities already, and Steemit is not an incredibly efficient way to organize a pump and dump.
In short, it truly does appear as though they have strived to add value in the network.
But in general, I advise newcomers to be wary of the overwhelming positive reports on certain coins, and conversely overwhelming negative reports on coins (shorters also plague crypto communities with FUD - Fear, Uncertainty and Danger).
It's actually going to be very ugly when STEEM gets its first real dump. I people get so myopic with that sort of thing.
Hopefully they'll not be so emotionally involved and will see the bigger picture.
It's common with alts where a 5% drop is called a "crash." Still, that sort of thing is smoothed out by the 7 day average in the SD feed.
Hey @positive. Help spread the great news man: https://steem.ly/f Thanks!! I try to #doyourpart
Thanks man!!
Where would a Steem dump come from and for what purpose? If it's from speculators then of course it could happen but I expect Steem to act more like Bitshares used to act. There was a slow dilution of Bitshares over a period of many months but that happened because the userbase of Bitshares wasn't growing at a rate fast enough to support the dilution.
In this case there is plenty of demand for Steem, Steem Power, Steem Dollars, and each new user increases demand for all three.
I mean I think it's natural for all assets that can be converted into cash to be heavily sold at some point, could just be that a holder cashes out. The dump would actually be a result of the panic selling by emotionally engaged traders.
Did it not have its first dump just a few days ago?
I mean... I guess it is back at $4.50.....
Nice article, especially for people new to crypto. I have seen so many pump in dumps on every coin I have ever taken. Remember fear is a much stronger emotion than greed and that's why the dumps fall much faster than the pump. As the saying goes, "Crypto currencies take the stairs up and the elevator down. " Trade and invest safely friends.
If you're trading/buying alts, full disclosure, it's risky
be safe and learn 8]