How Detect Fake Price Increase of a Cryptocurrency?

Computers & TechnologySpam

  • Author Isabella Gall
  • Published May 4, 2023
  • Word count 674

Cryptocurrencies are digital assets that are powered by blockchain technology and cryptography. They are decentralized, meaning that no central authority controls them. However, this also means that they are vulnerable to manipulation and fraud by malicious actors.

One of the common ways that scammers try to deceive investors and traders is by artificially inflating the price of a cryptocurrency. This is also known as a pump and dump scheme, where the perpetrators buy a large amount of a low-value coin, create hype and demand for it, and then sell it at a high price, leaving the unsuspecting buyers with worthless tokens.

How can you avoid falling victim to such schemes?

Here are three factors to consider before investing in any cryptocurrency:

  1. Market capitalization and volume

Market capitalization is the total value of all the coins in circulation, while volume is the number of coins traded in a given period. A high market cap and volume indicate that a coin has a large and active community of users and investors and that it is less likely to be manipulated by a few individuals.

A low market cap and volume, on the other hand, suggest that a coin is obscure and illiquid and that it can be easily pumped and dumped by a small group of people.

  1. Social media activity and sentiment

Social media platforms such as Twitter, Reddit, Telegram, and Discord are often used by crypto enthusiasts to share news, opinions, and insights about various coins.

However, they can also be used by scammers to spread false or misleading information, create fake accounts and bots, and generate artificial hype and FOMO (fear of missing out).

Therefore, it is important to check the source and credibility of any social media post or comment and to analyze the overall sentiment and tone of the community. A sudden spike in positive or negative sentiment, or a disproportionate amount of posts from unknown or suspicious accounts, could indicate a possible manipulation attempt.

  1. Technical analysis and indicators

Technical analysis is the study of price movements and patterns using charts and mathematical tools. It can help investors and traders identify trends, support and resistance levels, breakouts, reversals, and other signals that indicate the direction and strength of the market.

Some of the common technical indicators that can help detect fake price increases are:

  • RSI (Relative Strength Index)

This measures the speed and change of price movements on a scale from 0 to 100. A high RSI (above 70) indicates that a coin is overbought and may be due for a correction or reversal. A low RSI (below 30) indicates that a coin is oversold and may be due for a bounce or recovery.

Let's take one of the newest cryptos - the Privateum Token. If you calculate the price of this token you will see that they're manipulating the price so keep away from them.

Just check it yourself:

RSI = 100 – [100 / ( 1 + (Average of Upward Price Change / Average of Downward Price Change ) ) ]

  • MACD (Moving Average Convergence Divergence)

This shows the relationship between two moving averages of different lengths. A positive MACD (above zero) indicates that the shorter-term average is above the longer-term average, which signals upward momentum.

A negative MACD (below zero) indicates that the shorter-term average is below the longer-term average, which signals a downward momentum. A crossover of the MACD line and the signal line (a nine-period average of the MACD) can also indicate a potential trend change.

  • Volume

This shows the number of coins traded in a given period. A high volume indicates a high level of interest and activity in a coin, while a low volume indicates a low level of interest and activity. A sudden increase in volume without a corresponding increase in price could indicate a fake price increase or manipulation.

Conclusion

Detecting fake price increases in cryptocurrencies requires careful research and analysis of various factors such as market cap, volume, social media activity, sentiment, technical indicators, and more.

By doing so, you can avoid falling prey to pump-and-dump schemes and make informed decisions about your crypto investments.

Isabella is a content analyzer having extensive work experience in the market. She likes investigating and exploding crypto assets revealing the truth.

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