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Crypto influencers, or market manipulators?

Crypto influencers, or market manipulators?

This week our news feeds have once again been littered with stories of crypto influencers orchestrating ‘pump and dump’ schemes at the expense of their millions of followers.

On Tuesday it was reported that ex-Google tech lead Patrick Shyu, otherwise known as TechLead to his 1.1 million YouTube subscribers, had engineered a multi-million-dollar “pump-and-dump” scheme on Uniswap.

Patrick launched the Million token (MM) via an initial DEX offering on the decentralized exchange Uniswap last week, the token was described as a “pre-mined cryptocurrency with a fixed supply of 1 million tokens that are backed by one USD Coin (USDC) each per token”.

The token surged 3,500% from its launch valuation of $1.00 reaching $36.87 in just three days. The price subsequently declined by 58% to sit around $15.26 by the following Tuesday prompting a slew of ‘pump and dump’ accusations on social media. 

“By removing liquidity and not selling, he’s effectively selling without ‘selling.’ This way he doesn’t have to tell the community that he sold while they all bought, he just has to hold his initial promise of keeping 1m of USDC liquidity,” 

quoted one Twitter user, with another stating, 

“You’ve created a ‘get rich quick’ scheme so you can dump on your followers, you’ve added liquidity when the price is low and removed it when the price was high and profited the difference in $USDC.”

On the same day three members of FaZe clan, a popular group of esports competitors and entertainers, again with millions of fans, found themselves in hot water after being accused of promoting a separate pump and dump crypto scheme.

English YouTuber and Twitch streamer, Frazier Khattri “Kay” was removed from the esports group whilst two other members, Nikan and Teeqo, were suspended after the three were reportedly recruited by the creators of Save the Kids (KIDS) to promote the charitable crypto project ahead of its launch, only to watch as the price crashed by almost 90 per cent.

It should be noted that all three clan members have denied any deliberate involvement and Shyu has similarly denied that he “rug-pulled” investors by removing liquidity. 

Malicious market manipulators, or innocent parties guilty only of not properly vetting the promoted project? Either way, they are not alone. YouTubers, streamers, and all manner of social media influencers are jumping aboard the crypto train encouraging their followers to invest in the latest altcoin. 

It’s not limited to social media influencers either, Kim Kardashian recently became a cryptocurrency advocate promoting the new altcoin Ethereum Max and not too long ago a certain cryptocurrency media outlet published a list of celebrity bitcoin holders which included the likes of Kanye West and Snoop Dogg,  concluding that “we know for sure that bitcoin has value in the eyes of the most influential people on the planet.”

Perhaps no other market is more prone to influence from social media than cryptocurrency, where, for instance, a single tweet from a certain car manufacturer and space enthusiast can pump Dogecoin to all-time highs or send Bitcoin spiralling.

This becomes all the more concerning as institutions are increasingly opening up to crypto and entering the markets as they are experts in market manipulation and they play to win. 

Take JP Morgan for example, a company with a prolific history of manipulating everything from forex rates to metals markets. 

In June when Bitcoin was trading around $32,000 the company predicted the price could crash further with full retail capitulation closer to $24,000, a quick turnaround from the predictions of $146,000 just a few short months earlier when the coin was trading close to its all time high.

Similarly, in February Guggenheim’s Scott Minerd claimed BTC could reach $600,000, yet recently performed a complete about turn predicting it could sink to $15,000.

Even the most inexperienced of investors knows to sell into strength and buy into weakness, yet these institutions release press articles suggesting the exact opposite, trying to convince you to be overly optimistic at market peak and overly pessimistic at market bottom…

So, if we can’t trust influencers, celebrities or the institutions, what is the answer?

Research, research, research!

In reality, alongside all the market manipulators and wannabe social media influencers, there are plenty of experienced traders and market analysts offering genuine advice, but that doesn’t guarantee they will always get it right.

Make sure you understand the market, the coin and the risks, and if you do want to follow third party advice, research the individual or entity offering the ‘free’ advice and, more importantly, their motivation for doing so!

This is the views and options of Lee Mockler of The London Crypto Exchange