Pump And Dump: The McAfee Effect
Welcome to yet another serving of The Daily Bit. In yesterday’s HITS, we donned our tin foil hats and embarked down a rabbit-hole that shed light on what we pitched as A Series of Coincidental Events. To remain versatile, we’re abandoning any talk of conspiracy (for now) and focusing on a movement containing a more factual basis. So, as always — off we go.
We are, indubitably, in a bullish market. Anything even caught sniffing crypto these days has experienced a rise in prices — the aroma is contagious. What’s even better is this: we’re all winners! That is, of course, until the market reverses, and that aroma turns into a contagion.
Bear In Mind
While we know our readers consist of stand-out-gentlemen and women-in-business, we felt the current market climate called for a level-headed discussion on the dangers of speculative investments in a particular corner of the cryptocurrency market. This niche has been provided a calling name, and the title was awarded for good reason. They are known as $h*tcoins.
In Layman’s Terms, a $h*tcoin is the Natural Ice of cryptocurrencies. The contents of a $h*tcoin have no substantive value, but they have the uncanny ability to render you profoundly banged up. They consist of a wide array of alternate currencies, most of which possess low market capitalization, low trading volume and are featured on less esteemed secondary exchanges.
During this type of bull market, it can be fairly easy for investors to be lured towards price rallies spurred by nothing other than speculative investments. According to CoinMarketCap, the total cryptocurrency market capitalization (Excluding bitcoin) is fast approaching $400 billion. Concurrently, bitcoin’s representation of total cryptocurrency market capitalization has been on a steady decline. This confirms the agenda we have known for some time — people are looking for higher returns in the altcoin markets.
Look, we’re not monsters. Overall, it’s great to hear people are making money in these markets. Or at least you’re BTC / USD balance on Blockfolio has been growing. Remember: it’s not profit until you cash out. Something to keep in mind.
Anyways, there’s no perfect strategy to investing. Investment strategies should be molded to reflect your expected time horizon, trading frequency, risk appetite and preferred asset class, to name a few.
However, as of late, the only strategic decision that appears to be demanded is whether or not to invest in the market. Hammering this point once more, most projects are going up. ESPECIALLY cryptos valued below $1.00. Which, we must concede, is a genius investment strategy for those who anticipated there being a preference for “cheap” coins. Extremely risky, but applied with incredible foresight that paid off.
What’s important to remember is why they are going up. Remember, most of these are $h*tcoins that don’t bring provide a legitimate use case (other than perhaps P&D’s / memes). Sure, they appear lucrative for now, but their prices are being driven upwards by speculative demand. Rallies are not driven by if → then relationships:
Sidenote: BitcoinTre is a known scammer that uses a project called BitConnect to steal money from unbeknownst investors. Ari Paul, BlockTower Capital CEO, publicly acknowledged that BitConnect is a scam. For those interested in learning more about the operations of BitConnect, check out this Medium article.
Again, we want you all to be safe out there. Important to know who the good / bad actors are. Better to play Mom / Dad for a second over having someone lose money.
Shills 4 Thrills
In yesterday’s HITS, we mentioned the impact that media shill power can have on the price of a coin. Endorsements are commonplace in all industries, and the cryptocurrency markets are no different. However, the ability to differentiate between endorsements from good actors and endorsements from bad actors is crucial to ensure you are not bearing a disproportionate amount of risk with your investment.
With good actors, it’s also important to understand what type of project is being endorsed. By this, we mean whether or not a project fits the definition of a $h*tcoin. At the risk of beating a dead horse, we’ll say it again — this is especially important in this type of market.
Any and all positive statements about a project can ignite a rally. At the end of the day, an opinion is exactly that — an opinion. Nobody has a crystal ball when it comes to future price movement. what if the asset being inflated lacks any solid fundamentals? Well, you can guess what type of situation it can turn into.
Bringing It All Together
Our ramblings always have an end game. Right now, it comes full-circle to discuss an announcement given by John McAfee. A highly vocal member of the crypto community, McAfee recently shared the following tweet with his 200k followers:
Don’t get us wrong — McAfee is an intelligent dude. He’s expressive, but knows a thing or two about computers. In this case, McAfee is channeling both qualities. Making such a statement — say it with us, especially in this market — is GUARANTEED to capture the public’s attention.
On top of that, McAfee has a solid track record. Ever hear of Verge (XVG)? It’s a privacy coin that, until recently, was written off as a $h*tcoin. If it wasn’t for it’s recent bull run, XVG would be on CoinMarketCap’s list of bottom feeders shared earlier. Last Wednesday, McAfee tweeted his support for privacy coins, one of which was XVG. Naturally, several followers were confused. XVG was a $h*tcoin. At the time, it was trading closer to 50 Satoshi’s. McAfee must’ve misspoke.
But, he didn’t. In fact, McAfee doubled-down on Verge, cementing even greater support for the coin. What happened since then? It’s possible you’ve already seen a headline or two, so we decided to visualize it with a chart:
From peak to trough, Verge saw a price increase of nearly 2,000% in a matter of days. Had McAfee not mentioned Verge in his initial tweet, evidence suggests there is a strong possibility that the coin would have continued to ride out it’s days similar to how things were on December 12th. However, he had faith in privacy coins, and this one — a perceived $h*tcoin — had a LOT of room to run.
Now, Be A Good Trader…
In closing, be aware that similar announcements will be made each day for the unforeseeable future. If you’d like, give McAfee a follow on Twitter to stay on the cusp with everything he says. With Verge’s run fresh in people’s minds, there will be a lot of traders looking to McAfee to help them get quick returns. In effect, as eloquently put by @cryptonite420, each coin McAfee reviews may potentially result in a Pump-And-Dump type of situation. If McAfee shares a negative opinion, that may potentially lead to a panic sell.
There’s no guarantee that a coin on your radar will be impacted, but if McAfee did in fact read every whitepaper, an unannounced review falls within the realm of possibility. So, what do we ask? Be mindful of what he preaches. Because, at the end of the day, if it’s nothing more than $h*t, it affords more chances for this chart pattern below to make an appearance.
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