With the current cryptocurrency market being worth an estimated $300 billion and 1,300 different types of cryptocurrency in circulation, the sector is booming. Surprising news however is that huge cryptocurrency exchange Bittrex has contacted its users to warn against getting involved so-called 'Pump and Dump' scams.
What is a 'Pump and Dump' scam?
As a means of manipulating the market for personal gain, the 'Pump and Dump' has been around for a long time. Once seen in the stock market before it was banned, it has now seemingly re-surfaced in the cryptocurrency world. The general idea is that a group of investors will buy large amounts of a selected coin cheaply which will then lead to an artificial increase its price.
They will then sell their coins to other investors not involved in the scheme at the new high price to make their money. Of course, the nasty downside to this is that the investors they sell too are left with coins that are worth far less than they paid.
Bittrex takes steps to act
A recent investigation by the well respected Business Insider organisation found that some users on Bittrex were involved with this type of scam. In an effort to eradicate it from their platform, Bittrex decided to contact all their users. In the message, all Bittrex users were warned that their account would be frozen or suspended if they were found to be involved in 'Pump and Dump' schemes.
As one of the world's largest cryptocurrency exchanges, Bittrex turns over an estimated $1 billion per day in trades. Naturally, it is not suggested that they are involved themselves in any such activity but have taken these steps to ensure any people who use their platform aren't either.
Other cryptocurrency exchanges affected too
It is not just Bittrex who have some users who use this manipulative tactic. Other cryptocurrency exchanges like Indorse and ChillCoin were also found to have users who were involved in the same scheme. As with Bittrex, there is absolutely no suggestion that the companies themselves are involved. However, many now believe that this practice should be made illegal under official regulation to stamp it out for good.