Have you ever wondered why stocks go up, or bitcoin passes $60,000 all of sudden? It’s all the same concept…except Pump and Dump was intentional.
When a demand for anything goes up, be it gas, electricity, food, or stocks, the price goes up as well. This is the “Supply and Demand” concept, when a smaller supply of something will cause it to be more valuable.
Fraudsters usually execute a “Pump and Dump” scheme like this: They buy a stock or cryptocurrency, then spread false or misleading information about the company or coin to attract more investors, increasing demand for the asset, and driving up the price.
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Once the asset has gained value, they then sell it for profit. But because they had bought up loads of the shares, selling it would dramatically drop the asset’s value. This leaves the investors who bought the stock left with worthless shares.
A great example is Dogecoin. What started off as a fun meme project with a value of $0.00058 when it was first launched in 2013, slowly gained value as the coin gained popularity. In 2020, the coin’s price had quadrupled to $0.002, which is 1/5 of a penny; barely worth anything unless you had tons of it.
Then in January 20th, 2021, Dogecoin went up over 800% as a result of attention from Reddit users & encouragement from Elon Musk, hitting a price of $0.07
Here is where it gets crazy. On April 27th, 2021, Elon Musk tweeted:
With a following of 68 million followers at the time, this tweet would go viral and increase the price of dogecoin by 300% in 4 hours, before dropping to half of its new high in the following hours.
This is the first time Musk has tweeted about the subject, and it was strange to see his profound power over the coin’s market value. He may have been planning this all along, or it was just a coincidence.
Either way, it was strange to see his promotion of a particular cryptocurrency, and the price dropping dramatically within a few hours after it’s all time high
We would see further promotion of Dogecoin through his tweets, as he accepted Dogecoin as a payment method for Tesla, claiming his support over dogecoin, and even went ahead and said this:
“I will eat a happy meal on tv if @McDonalds accepts Dogecoin”
Although Mcdonald’s declined this offer, many of Mcdonald’s rivals such as MrBeast Burger took his tweet seriously, and offered to accept dogecoin if he replies.
On April 1st, 2021, Elon tweeted:
“SpaceX is going to put a literal Dogecoin on the literal moon”
Then his most notorious tweet:
Seeing Elon’s massive support for Dogecoin, many big cryptocurrency exchanges like eToro and Gemini would allow it’s users to trade Dogecoin. This spiked the coin’s value to it’s all time high; trading at $0.73157 per coin.
So was this all a Pump and Dump scheme? Some suspect that it is, with an article by Fortune reporting on a lawsuit filed against Elon Musk, seeking $285 billion in damages.
“Defendants falsely and deceptively claim that Dogecoin is a legitimate investment when it has no value at all,” — Keith Johnson
The coin’s value was artificially increased by Musk’s tweets, and a decision made by his company SpaceX to accept payments in Dogecoin. The coin was trading near an all-time high of $0.73 in May 2021, but now sits at $0.06 per coin.
Although results about this lawsuit haven’t been released yet, we know something is sketchy. This may have been all a Pump & Dump all along, because we know that he holds some Dogecoin himself.
In theory, if Elon really was involved in this Pump and Dump scheme, he could’ve tweeted something crazy, then sell his Dogecoin at the all time high. Although no evidence points this way, Dogecoin’s unstable value is a great example of a Pump and Dump scheme
At the time of writing this article, Dogecoin’s price sits at $0.078. The coin’s value does have a strange connection with Elon Musk, as the price surges when Elon Musk buys twitter, and falls when a poll decides his resignation as CEO of Twitter.
This article is not to target Elon. I like the companies he’s founded, and the SpaceX projects he’s done, but some of his tweets can be very controversial, and the Dogecoin situation is a great example
Thanks for reading!
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