Our weekly crypto derivatives analytics report delves into macro events and the current state of crypto and trading signals from spot trading volume, as well as futures, options and perpetual contracts.

Another week brought another risk-off event in the crypto market, reflecting its correlation with equities. Despite last week's sell-off, BTC outperformed the broader market with a milder decline, evident in its derivatives positioning. Options markets initially priced short-term volatility higher, but the inversion resolved quickly. In contrast, ETH experienced a sharper inversion, with significant spikes in short-term options and realized volatility. A liquidation event led to an estimated $10 billion loss in open interest for perpetual swap contracts, 

. This bearish sentiment was reflected in funding rates, with altcoins showing a more persistent negative trend post-crash as compared to BTC.

Open interest collapsed across major tokens, flipping funding rates negative, except for BTC. ETH's realized volatility surged above 140%, its highest level in over three months, with the implied volatility term structure spiking and remaining inverted days after the crash.

Please check out the report’s highlights.

Open Interest Falls During Painful Liquidation Event

Another Monday sell-off occurred alongside a decline in U.S. equities and other risk-on assets due to fears over Trump tariffs, leading to a drop in perpetual swap positioning. Nearly $3.1 billion in open interest was wiped out from the perpetual swap markets of BTC, ETH, XRP and SOL after a late-Friday high. This decline was likely driven by liquidated leveraged positions, as traders missed margin calls during the rapid drop in spot prices. Bybit CEO Ben Zhou estimated that the true notional value of liquidated positions across markets may have ranged from $8 billion to $10 billion. The sell-off also triggered the largest spike in trading volumes in over a month, with $31 billion in perpetual swap contracts traded on Feb 2, 2025 across the four major tokens’ markets.

Altcoin Funding Rates in Negative; BTC Clings to Neutral Rates

A second consecutive Monday-morning sell-off has kept perpetual swap funding rates low and negative, indicating excess demand for leveraged short exposure. This trend likely stems from the liquidation of long positions, due to the sharp correction in spot prices. Notably, altcoins' funding rates have shown more consistency since February 3, 2024, reflecting their steeper declines as compared to BTC’s.

ETH's spot price experienced a deeper correction than BTC’s during Monday's sell-off, dropping below $2.5K. Surprisingly, options market activity remained steady, likely due to fewer at-risk leveraged long positions to liquidate, thus keeping open interest levels firm. However, the spot move caused realized volatility to spike near 140%, with options markets pricing in a significant term structure inversion that has yet to be resolved. ETH's implied volatility is approximately 15 points higher than BTC's at equivalent tenors, indicating that traders expect continued volatility in ETH's spot price.

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Bybit X Block Scholes Crypto Derivatives Analytics Report (Feb 5, 2025): Record Liquidations Result From Perp; Traders Expect More Volatility in ETH

Victoria VR leverages AI and blockchain to enhance gaming with immersive VR experiences, AI-driven interactions, and a self-sustaining digital economy.

With over 3 billion gamers worldwide (and counting), the 

 industry needs to constantly find new and innovative ways to keep their myriad participants entertained and engaged. Technologies such as virtual reality (VR) and the 

, which include augmented reality (AR) and 

, have contributed substantially to creating an immersive gaming experience.

As the metaverse continues to unlock endless opportunities for the gaming world, Victoria VR has set out on a mission to integrate artificial intelligence (AI) to improve gaming experiences.

Let’s take a deeper look at Victoria VR and the way it’s leveraging AI to tap into the gaming metaverse and upgrade users' experiences.

Victoria VR is a blockchain-powered virtual reality (VR) AI metaverse designed to leverage AI and VR to provide an immersive web3 gaming experience. 

The Victoria VR blockchain project is on a mission to create a thriving and immersive infrastructure in which the gaming world can explore its metaverse in an enhanced way.

Through AI, Victoria VR provides gaming developers with AI tools to build immersive games in a secure, transparent and scalable ecosystem. With features like the VR AI Builder and AI Agents, Victoria VR provides an AI-powered ecosystem to interact with its metaverse.

Its native token, VR, is poised to provide users with a self-sustaining virtual economy in which gaming, blockchain, the metaverse and VR content creation can interact cohesively.

To shape the future of VR through an AI-powered metaverse for immersive gaming, Victoria VR has created the following features.

The VR AI Builder is designed to simplify developers' challenges when creating VR content. Currently, VR game development requires programming skills and significant resources in terms of time and money. However, the VR AI Builder is integrated with OpenAI, making it simple to use with simple text commands. With VR AI Builder, anyone can quickly create VR content, thereby reducing costs, saving time and supporting scalable growth. It also supports integrating new AI technologies as they continually emerge.

The VR AI Builder empowers both novices and experienced developers to create and expand virtual worlds, complete with games and assets. Furthermore companies can use the VR AI Builder to create virtual buildings, showrooms and storefronts; simulate training; and provide immersive experiences to their customers.

The VR AI Builder is driven by the VR token, which plays a crucial role in building and monetizing virtual worlds.

At the heart of Victoria VR’s metaverse are its AI Agents, autonomous and intelligent creations that can independently interact and adapt in a virtual environment. These agents learn user behaviors and preferences in order to provide customized and effective support.

Creating VR AI Agents on the platform is accessible to everyone, and doesn’t require advanced technical knowledge. Some specific roles these agents can perform include NPCs in games, shopping assistants in virtual stores and even virtual teachers.

VRtap is a Telegram-based clicker PvP game by Victoria VR that uses feng shui to immerse players in an elemental adventure, helping the project community stay connected and engaged.

Some of the features of VRtap include the following:

VR is the native token that powers the Victoria VR platform. It's designed to facilitate seamless interaction on the platform and ensure a self-sustaining economy. The total supply of VR is 16.8 billion tokens, with a current circulating supply of just under 6.85 billion.

As a utility token, VR has numerous use cases on the platform, including staking, governance and diverse use in powering Victoria VR's AI and gaming aspects.

The VR token is crucial to the self-sustaining aspect of Victoria VR's gaming pillar. It’s designed to ensure long-term sustainable value for the various stakeholders in the ecosystem.

The VR token is essential for accessing and monetizing the VR AI Builder feature. Builders need VR tokens to buy VR land in order to start using the feature. Once you have VR content, you can monetize it and receive payments in VR tokens.

Furthermore, the platform collects part of the fees generated through this feature in the form of VR tokens, which boosts circulation and enhances token utility.

The VR token helps create and fuel intelligent virtual experiences through VR AI Agents on Victoria VR. VR tokens’ use cases for VR AI Agents include the following:

VR tokens facilitate user interaction with the Victoria VR metaverse via both PC and mobile versions. Users can earn VR tokens through activities such as mining and community engagement. These tokens also ensure a cross-platform economy, whereby VR tokens earned from either version can be used across the Victoria VR ecosystem.

 Perpetual contract in the Innovation Zone with up to 20x leverage. Tokens listed in the Innovation Zone are typically from new projects that may be subject to higher volatility.

As of Feb 7, 2025, Victoria VR's price was $0.007863, a 98.7% drop from its all-time high (ATH) price of $0.61 on Dec 10, 2021, and a 67.7% increase from its ATL of $0.0047 on Jan 3, 2023.

Price prediction experts are cautiously bullish on the future price of the VR token. Experts at CoinCodex believe that VR 

 a maximum price of $0.01 in 2027, and increase to $0.03 in 2030. Meanwhile, DigitalCoinPrice’s forecasting experts believe that VR 

 $0.028 in 2027 and reach $0.0425 by 2030.

That said, these bullish predictions don't guarantee the future price of VR. We highly recommend you 

 before investing in VR or any other cryptocurrency.

Victoria VR is redefining the metaverse with its AI-driven, hyperrealistic virtual world. By blending blockchain technology with immersive VR, it offers an unparalleled digital experience so users can explore, interact and create with limitless possibilities.

Victoria VR’s integration of AI into gaming through the VR AI Builder and AI Agents gives it a competitive edge, and makes the project stand out in the web3 space, making its native token, VR, an asset to watch in the web3 space.

Beginner

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Victoria VR (VR): The Ultimate AI-Driven Metaverse Experience

Explore the difference between Spot and Perpetual Futures and find out how you can navigate volatile markets with these two trading methods.

Bitcoin moves 20% in an hour. Ethereum nose-dives as a whale dumps holdings. The crypto market is a poster child of volatility, and panicked traders may scramble. Others, calmer, may seize the chaos in order to profit. What separates these two outcomes? Often, it’s the trader’s hard choice of weapon.

Although spot trading and perpetual futures are both popular trading methods in crypto, their mechanics — and risks — are worlds apart. Spot trading offers simplicity and direct ownership, while perpetual futures provide leverage and flexibility. Each method carries its unique risks. 

In volatile markets, these tools behave differently, and a poor understanding of their dynamics can turn a calculated risk into a catastrophe. This article dissects spot and perpetual futures, explains why volatility amplifies their risks — and shows you how to choose the right strategy when markets go haywire. 

 is the buying or selling of a digital asset (like 

) for immediate delivery and settlement at its current market price. When you trade on spot, you directly exchange cash or 

 for the asset, with no expiration dates, 

You directly and physically own the asset as soon as the transaction is completed. The trade is settled on the spot (hence the name), meaning the exchange of the asset and the payment happen almost instantaneously, eliminating the risk of price fluctuations during the settlement period.

Say Bitcoin is priced at $100,000, and you buy 1 BTC on a spot exchange such as Bybit. You pay $100,000 (or equivalent in stablecoins) and immediately receive the Bitcoin in your wallet. If the price crashes to $90,000 the next day, your BTC is now worth $90,000 — a 10% loss. If, on the other hand, it surges to $106,000, your gain is 6%. The risk and reward are straightforward: you’re fully exposed to the asset’s price movement, with no amplified gains or losses. 

Here’s a visualization of the mechanics:

[Crypto Exchange] → [Deposit Fiat Currency/Stablecoins] → [Purchase Cryptocurrency on Spot Market] → [Wallet] 

 (or "perps") are derivative contracts or agreements to buy or sell an asset at a predetermined price at any time in the future. They let traders speculate on an asset’s price without ever taking ownership of it. 

Unlike traditional futures, which expire on a set date, perpetuals have no expiration — hence the name. Instead, they rely on funding rates to tether their prices to the underlying spot market. If combined with leverage, they’re a high-risk, high-reward tool for potentially profiting in volatile markets. 

Perpetual futures allow traders to use leverage, meaning the exposure is larger than the initial capital. For example, with 10x leverage, a $1,000 margin lets you open a $10,000 position. If Bitcoin rises 10%, your profit is $1,000 (10% of $10,000), doubling your initial margin. But if Bitcoin drops 10%, you lose your entire margin ($1,000) and face 

. Leverage magnifies volatility’s impact, turning small price swings into existential risks.

 is the collateral required to open a leveraged position (e.g., $1,000 for a $10,000 position at 10x), while the 

 is the minimum collateral needed to keep the position open. If your margin falls below this threshold, due to losses, you must add more funds or the exchange liquidates your position automatically. 

Let’s assume you open a 10x long on Ethereum with a $1,000 margin. If ETH drops 9%, your loss is $900, leaving $100 in margin. If the maintenance margin is 5% ($50), you’re still safe. But a 10% drop in Ethereum wipes out your margin, triggering liquidation. 

Funding rates are periodic payments (usually every eight hours) between 

 traders to keep perpetual futures prices close to the spot price. A positive funding rate exists when longs pay shorts. This happens when perpetuals trade above the spot price, incentivizing traders to sell (short). Negative funding rates — meaning that shorts pay long — occur when perpetuals trade below the spot price, encouraging buying (going long). 

In volatile markets, funding rates can swing wildly. For example, during a Bitcoin rally, excessive bullish sentiment may push perpetuals’ prices above spot prices, forcing longs to pay hefty fees to shorts. 

Trading a perp looks something like this:

[Trader’s Margin] → [Leverage (e.g., 10x)] → [Open Position] 

[Price Movement] → [Profit/Loss Calculated in Real Time] 

[Funding Rate Payments] (Every 8 Hours) 

[Liquidation if Margin < Maintenance Threshold] 

The Crucial Difference: Pricing Mechanisms

Traders must understand how prices are set in spot trading versus perpetual futures, especially in volatile markets, as mispricing can lead to unexpected losses or missed opportunities. 

 on a single exchange. When you buy Bitcoin on Bybit, the price reflects the highest 

 (sell order) in Bybit’s order book at that moment. When more people want to buy an asset than sell it, the price increases. Conversely, when more people want to sell than buy, the asset’s price drops.

However, spot prices can vary wildly between exchanges. High-volume exchanges, such as Binance or Bybit, typically have tighter 

 (smaller gaps between bid/ask prices). Regulatory restrictions and/or regional buying/selling pressure can also create price disparities. 

Perpetual futures prices aren’t tied to a single exchange. Instead, they track an index price, a weighted average of spot prices from multiple reputable exchanges. This arrangement prevents manipulation, and ensures fairness.

First, reputable exchanges with strong liquidity, such as Binance, Bybit and Kraken, are selected as contributors. Weights are then assigned based on trading volume, giving greater influence to exchanges with higher activity. The index price is computed using a weighted average, whereby (for instance) Binance contributes 50%, Bybit 30% and Kraken 20%, resulting in a balanced and representative market price.

Here’s a visual aid for the calculation: 

Index Price = (Binance Price × 50%) + (Bybit Price × 30%) + (Kraken Price × 20%).

Perpetual Futures Price ≈ Index Price + Funding Rate Adjustments 

Withdrawal halts occur when exchanges temporarily block users from moving assets off-platform. They are rare but catastrophic events, often triggered by extreme volatility, regulatory crackdowns or security breaches. These halts expose the fragility of spot markets, while highlighting the resilience of perpetual futures.

Imagine an exchange suddenly halts withdrawals. Its spot market turns into an isolated bubble, cut off from the broader crypto ecosystem. Here’s how this could happen:

 traders help balance prices across exchanges. If BTC is cheaper on one platform, some traders will buy it there and sell it on another where Bitcoin’s price is higher, keeping prices in sync. But when withdrawals are frozen, traders can’t move assets, making cross-exchange arbitrage impossible.

Let’s say Binance halts BTC withdrawals during a market crash. Panic selling on Binance drives BTC’s price down to $25,000, while on Bybit, it remains at $28,000. Under normal conditions, arbitrageurs would step in, buying cheap BTC on Binance and selling it on Bybit to close the gap. But with withdrawals locked, Binance’s price remains disconnected.

With liquidity trapped, bad actors can exploit the situation. A 

 could dump BTC on Binance, crashing its price to $22,000, while Bybit keeps trading at $28,000. Retail traders on Binance would suffer large losses as they’d be unable to transfer assets or take advantage of the price difference.

When withdrawals freeze, spot markets fracture, leaving traders stranded in a distorted price bubble, with no hope of escape until normal operations resume.

Perpetual futures contracts avoid the chaos of isolated spot markets by relying on an index price aggregated from multiple exchanges. This mechanism keeps them anchored to the broader market, even when individual platforms experience disruptions. 

For example, if Binance suddenly halts withdrawals, its BTC price may diverge from the rest of the market. However, because the index also includes prices from exchanges like Bybit and Kraken, it remains stable. Even with Binance carrying a 50% weight in the index, Bybit (30%) and Kraken (20%) ensure that the final calculation reflects a more accurate market value. This mechanism prevents traders from becoming trapped in a price bubble caused by a single exchange’s issues.

Another advantage is resistance to manipulation. If a bad actor tries to crash BTC’s price on one exchange, their influence on the index remains limited. To meaningfully distort the index price, they would need to control multiple major exchanges — a far more challenging and costly feat. 

This hardiness makes perpetual futures a more reliable option during crisis scenarios. Spot traders may get stuck with distorted prices when withdrawals are halted, but perps remain tethered to a broader market view. While they’re not immune to volatility, their reliance on aggregated data provides a crucial safeguard. However, traders must also consider funding rates and leverage risks.

Navigating a Withdrawal Halt: Staying Calm and Informed 

A crypto withdrawal halt — whether due to a flash crash, regulatory action or technical failure — can send traders into a frenzy. Prices may swing unpredictably as speculation runs wild and liquidity dries up. Nevertheless, survival in these moments is about keeping a level head.

Before making any moves, verify the situation. Fear-driven rumors spread fast, but official channels provide the facts. Exchanges like Bybit now offer real-time transparency on liquidations via their APIs, and CEO Ben Zhou has been vocal about publishing 

 during crises. Trust credible sources, not whispers from anonymous Telegram groups.

Emotional trading is the fastest way to lock in losses. Spot market prices on a halted exchange can detach from reality, plunging far below the broader market. Selling into that panic only benefits manipulators. Likewise, overleveraging on perpetual futures can backfire during times of extreme volatility. Traders who endure these moments best are the ones who stick to their risk management principles and wait for conditions to stabilize.

Bybit is setting new standards by committing to transparency, publicizing real-time liquidation data and encouraging open communication. During times of uncertainty, reliable data keeps traders grounded, helping them separate signals from noise and navigate volatility with clarity rather than fear.

Volatile markets test the strengths and weaknesses of both spot and perpetual futures trading. 

Cryptocurrency markets thrive on volatility, but surviving and profiting from volatility depends upon choosing the right tools. Spot trading offers direct asset ownership, simplicity and no liquidation risk, but it can be vulnerable to exchange-specific halts and price slippage during market turmoil. On the other hand, perpetual futures trading allows traders to profit in any market direction, benefit from leverage and avoid single-exchange manipulation through index-based pricing, but it also carries liquidation risks, complexity and funding rate costs. 

Regardless of your trading method of choice, risk management is crucial. Educate yourself and set 

 to minimize exposure. In addition, dive into Bybit’s 

 to sharpen your edge, and learn how to get started with 

Intermediate

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Spot vs. Perpetual Futures: Stay Ahead of the Curve in Volatile Markets

Ankr has been chosen to power TAC, a groundbreaking TON Network extension that brings full EVM compatibility to TON. 

The S&P 500 rose 0.36%, led by consumer staples, financials, and tech, as investors awaited the jobs report. Gold fell 0.38% to $2,852 amid rising yields and profit-taking before the jobs report but remains near YTD highs. Coindesk Indices, an index measuring broader cryptocurrency market performance was down by 0.81%, with Bitcoin and Ether dropping by 0.44% and 2.91%, in the past 24 hours. Trade these markets and more with up to 500x leverage on Bybit MT5 using this 

Today’s top performer is BERA, which surged nearly 3.0% following Berachain's mainnet launch and $632M BERA airdrop announcement.

Berachain (BERA), founded in 2021, is a Layer 1 blockchain with Proof-of-Liquidity consensus, ensuring security and liquidity while maintaining full Ethereum compatibility. Berachain launched its 

 on February 6, alongside a $632 million BERA airdrop to eligible users. Around 79 million BERA tokens were distributed, primarily to Bong Bears NFT holders. BERA serves as the network’s gas and staking token. Berachain uses a Proof-of-Liquidity consensus to enhance security and liquidity. Token allocations also include funds for community initiatives, ecosystem R&D, and institutional investors.

Check Out the Latest Prices, Charts, and Data of 

, a groundbreaking TON Network extension that brings full EVM compatibility to TON. TAC enables Ethereum developers to deploy seamlessly on TON while unlocking access to 100M active wallets and Telegram's 950M users. Built using the Cosmos SDK and Ethermint, TAC integrates Babylon’s Bitcoin staking protocol for enhanced security and decentralization. Assets like Teleport BTC (tgBTC), stTON, and tsTON will support restaking within TAC’s infrastructure. As the first blockchain leveraging Ankr’s Bitcoin Secured Infrastructure, TAC bridges Ethereum’s liquidity with TON’s scalability, advancing Web3 growth within Telegram’s ecosystem.

Yesterday, BTC Spot ETFs had $140.2M in outflows, with GBTC losing $42.2M and non-GBTC funds dropping $98.0M.

Kuroro Wilds, an Ethereum RPG on Ronin, launched a 

 campaign ahead of its KURO token launch. Players earn rewards by completing quests, social tasks, and referrals. The event offers 10M KURO and Treasure Eggs, running until mid-February. VIP pass holders get extra rewards, while top players can win additional prizes. KURO’s launch date is yet to be announced.

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Ankr Powers TAC to Bridge TON and Ethereum with Bitcoin-Secured Infrastructure for Enhanced Web3 Growth

Crypto

Investing

Trading

Pump and dump schemes happen notoriously in the crypto industry, involving influencers who spread the news to inflate the price artificially. Learn how to avoid this fraudulent scheme to make the best investment choice!

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Bitcoin, the largest and most prominent cryptocurrency, consistently has over

 and has been featured on Fox, Bloomberg, 

. There are now at least 100,000 crypto millionaires among us. 

But just like the Wild West was, the world of crypto is a lawless place full of uncertainty and greed. Many would-be millionaires are taking advantage of insufficient regulation to employ tactics that are illegal in other markets. One such scheme currently flying under the regulation radar is the pump and dump.

The idea behind a pump and dump scheme is simple: A group of bad actors deliberately buys an asset, often small-cap stocks or other thinly traded securities, sings its praises to anyone who will listen — using false news or information (pump) — then sells when the increased activity drives up the stock price (dump). This often leaves those who bought the hype holding the bag, as asset prices crumble and artificial demand dries up.

Once done over the phone in boiler rooms, as in the movie 

 pump and dump schemes now have the internet and robo traders fueling these schemes. The underlying strategy is still the same: Buy a low-volume asset, pump up its potential returns to investors on message boards, group chats and social networks, promise huge returns, and then dump the position when the buying starts and the price spikes. 

The main difference today is that the timing between getting in at the bottom and holding the bag at the end can be less than five minutes. It’s rarely more than a day or two. The below graph shows what happened to Mimosa (MIMO) earlier this month.

As you can see from the example above, on Sunday, Jul 11, the pump started. Bad actors in the pump group took to message boards with false information to drive up the price. With volume increasing 10x over the previous week, this frenzy pushed up the price, normally around $0.20, to a high of around $0.87. However, the 340% increase evaporated almost as quickly as it had arrived. 

By Tuesday morning, the price was back to $0.20, and over $750,000 had changed hands. The only investors left with a profit were those who had sold during the hype, with many accounts deep in the red, holding a coin with no real value. Low trading volumes mark the end of the dump scheme.

The pump and dump scheme is just old wine in new wineskins: it’s been around for ages. The scheme’s strength lies in its simplicity. 

 pump and dump is finding the asset. It needs to be something with low volume: Because the crypto asset is thinly traded, it’s more likely to react favorably when volumes increase. Market manipulation is more likely to work on these types of coins than those with high or average trading volumes. It’s also often a coin that has recently been issued through an 

 (ICO), since it’s easier to create a positive spin on an unknown asset than one with years of historical data. Many investors are looking for the next big digital coin, so picking a new “up-and-comer” makes the scheme easier to pull off. 

Bad actors, especially those on Discord’s internet platform, often try to find coins without a 

 so there’s no downward pressure on the pump target. Ideally, the schemers are able to pick an asset with a relatively stable price, so that in the event the manipulation scheme doesn’t work, the asset can be off-loaded without a potential loss from volatility.

Once the target has been identified, bad actors begin slowly buying up available coins. The goal is to amass a large position slowly, so as not to spike the volume or tip off others. This can be done over days or weeks in order to keep the price stable.

Now comes the pump. Due to the history of pump and dump schemes, and the ability of investors to research claims quickly, new tactics are being employed. Current scammers go on Discord, Telegram and/or other chat groups to suggest that groups participate in a pump and dump. 

For example, groups like Voyager Pump or Galactic Pump will promote coins on Discord for their members to pump and dump. They pitch that they’ll receive the coin to pump from an algorithm or bot so that nobody can get in early. They often also sell VIP access, where those paying for the information get the target 5 to 10 minutes before the rest of the members of the group. In reality, 

 This just manipulatively creates the perception of a “fair” scheme to participants. 

When the group now purchases the coin in what they believe is a pre-pump market, the perpetrators of the scam off-load their holdings. The Discord accounts will count down to the dump, creating a time limit and FOMO (fear of missing out) for investors. 

Encouraged by deliberate misinformation and rising prices, many more traders jump in, causing the price to rise even faster. The excitement and hopes of further gains reach a crescendo, and the group’s members flood the market, trying to get some coins before (they believe) the information is to be released to the general public. 

With the asset now at a much higher price, the conspirators behind the initial buying and publicity start to off-load their holdings, making substantial gains in the process.

By the time the information has reached Twitter or Reddit, the scheme has already taken place, and the rest — hoping to profit from the illicit scheme — are instead left holding the bag. The poor folks who joined the party rather late are stuck with now worthless assets and no buyer in sight. The scheme ends here — and the group moves on to the next one.

This is how a standard pump and dump scheme works. Of course, the process can take many forms, and there are nuances, but the principles are the same.

Below is an example of how Rocket pump was able to use its members to increase volume. Notice how the spike occurs within 5 minutes of the announcement, and then dramatically rises prior to the announcement, probably from “VIP” members paying for early information.

Now, it’s hard to feel bad for someone who gets scammed while trying to scam others, but sometimes the victims are innocent bystanders, unknowingly trying to find the next big thing. There are also instances in which investors utilize their stature to pump coins. In one example, the late John McAfee allegedly 

Starting in December 2017, he promoted a series known as “Coin of the Day.” These coins were obscure, often low volume, and each saw a substantial spike after his endorsement. Take, for instance, 

 (ETN, shown below). On Dec 21, 2017, just minutes after his tweets praised the coin, the market cap for the obscure new asset doubled. Investors piled on to get a piece of “the holy grail of cryptocurrency,” as McAfee described it.

With Electroneum and other assets, McAfee was either holding the coins without disclosing his interest or being paid by coin issuers to promote their ICOs. In March of this year, a few months before his passing, McAfee

 for his role in the scheme. This was a statement move by regulators in an area that has been thinly prosecuted.

Now that we know what a pump and dump scheme is, and how it’s orchestrated, how do we recognize when a coin is just popular and trending — or actually the vehicle for a scheme?

How to Spot a Crypto Pump and Dump Scheme

The easiest way to spot a pump and dump is to start by understanding its mechanics. If the value of a relatively unknown coin rises suddenly without reason, there’s a good chance manipulation is at play. It’s always best to do some digging before making a purchase. Avoid rushing into a project before you’ve researched it. 

If you wait a little bit to invest, you may lose out on some return, but having greater confidence in your investment will give you assurance in the long run. In the case of a pump and dump, the extra time might even save you from holding a wallet full of worthless coins. 

At the end of the day, here are the five main symptoms to look for.

A prime feature of pumps and dumps is their sharp price movement. While 

 can happen with any coin, during a pump and dump, coordinated action among a party of schemers is occurring. A coin’s value starts rising quickly for no discernible reason, and then later falls just as rapidly with no obvious explanation.

Looking at a coin’s price chart can tell you a lot about its volume changes and price history. There are also online trackers who will alert you to potential pump and dump schemes. For instance, 

 tracks any rise of over 5% within a 5-minute period to alert users to potential scams.

Pump and dumps are often coordinated schemes masterminded in online chat groups. Known pump-and-dump groups can be followed, though some may charge for timely information. The number of people in one of these groups can be as high as 200,000, though smaller groups can comprise about 2,000 individuals. Relatively anonymous and private channels on Discord and Telegram are often used to coordinate such schemes.

Vetting the source of your digital coin’s info is key to spotting rogue tips. If you see known perpetrators shilling the coin, or many posts from unscrupulous sources related to a less popular or risky coin, there’s reason to be wary. If a low-market-cap coin suddenly starts trending on Twitter or popping up on Facebook ads, and then you get an unsolicited investment offer, you might also want to exercise caution.

Groups that offer crypto trading signals may just be perpetrating pump and dump schemes. They’re trying to appeal to beginners who may have limited trading experience. After gaining their trust, they may charge fees for trading signals, but it’s impossible to know where those signals come from and whether they originate from manipulators. 

Influencers come in all shapes and sizes. If a random influencer with a questionable background and no cryptocurrency experience suddenly starts promoting a coin, be skeptical. Many promoters may also promise guaranteed returns. Be wary of any promises of free money and returns. If it sounds too good to be true, it usually is.

Thin trading volume usually means thin liquidity and order books that aren’t full of buyers and sellers to stabilize pricing. Market makers may not have much interest in a particular name to keep creating buy and sell orders. As a result, it’s easy for the price to spike well past typical levels, especially in a short period of time. Any asset with thin order books is more prone to price and trading manipulation.

 of a coin is calculated using its price multiplied by the supply. Pump and dump groups target low-market-cap coins more frequently because coins with smaller supplies also often exhibit less trading activity. These smaller coins are subject to price manipulation by groups of bad actors. Although what’s considered as a small market cap is subjective, coins below $1m in market cap are likely to fall into this category.

Exchanges that are less regulated are often more vulnerable to pump and dump schemes. Analysis has found that pump and dump schemes are relatively more frequent on exchanges Binance and Bittrex, compared to heavily regulated U.S.-based exchanges. Often, the price and volume spikes occur on a single exchange, rather than several exchanges.

If you encounter any of the above symptoms, it’s likely you’re witnessing a pump and dump.

Pump and Dump vs. Rug Pull: The Differences

As with any financial scams, cryptocurrency scammers and fraudsters try to use illegal and/or unethical ways to trick others into handing over their hard-earned money. One common scam to look out for is people offering a service or product — but only accepting crypto as payment. Because crypto is hard to trace, and can’t be refunded without the recipient’s permission, it’s the perfect currency to receive as a scammer. 

Another red flag is any website or communication that promises guaranteed returns. Returns are 

 guaranteed! Anyone saying otherwise is trying to sell you something — and separate you from your crypto. For more information, the Federal Trade Commission (FTC) has put together

Another large scam that has taken off is the 

. This is the creation of a crypto project by a developer whose sole purpose is to run away with investors’ money. As with a pump and dump, they’ll spend their time advertising the coin to whoever will listen. They’ll often pay for advertising on large websites with high traffic, as well, in order to increase the hype. 

 (DEXs) with low oversight. Scammers create a coin to list on a 

, tie it to another cryptocurrency such as Ethereum, and then pump it all over the internet. After a group of unsuspecting investors exchanges their legitimate crypto for the new coin, the bad actors cash out the liquidity pool, creating a worthless asset. 

Sometimes the hype phase of a rug pull will look like a pump and dump, as the creators drive up the price to create 

 and cash out, targeting more victims in the process. To avoid the rug pull, look for liquidity and lockups in a token pool. If there is little liquidity or no lock, it’s best to give the new coin some time before investing in order to make sure you don’t fall prey to this scheme. You also need to fully research coins before investing, which we’ll discuss more below.

Can You Profit from Crypto Pump and Dump?

Pump and dumps result in large swings in price movement, which can produce large gains. Profiting from pump and dumps, even unknowingly, is possible if you’re on the right side of the trade. But if your timing isn’t right and you get caught on the wrong wave, you might have trouble profiting from pump and dumps. In fact, you may even experience significant financial losses. 

Spotting a pump and dump strategy requires having enough confidence that the group you’re following will be first to the punch and artificially inflate prices. You’ll also need to be able to exit the trade in time to make money. 

 that helps you exit a position when prices move sharply downward. This means setting a sell order at a specific price to keep any losses minimal, thereby removing your position in the coin. Otherwise, if you hold on to a position for too long and exit slowly, you may end up a victim of falling prices from the dump. However, you will need the price to continue to move in your favor until your trailing stop loss is above your entry price in order to be profitable when the price reverses. 

With all the news and hype around cryptocurrencies, aren’t there laws in place to protect consumers? The answer is: Yes and no. Most countries have some laws on the books regarding intentional 

For example, in the United States, the Federal Bureau of Investigation (FBI) has an internet crime complaint center which monitors online fraud. However, due to the nature of cryptocurrencies, it’s hard to nail down which body regulates them. Depending on the regulatory agency, a cryptocurrency can be considered 

 This means it’s regulated by either the Internal Revenue Service (IRS), the Commodity Futures Trading Commission, the Securities and Exchange Commission or the Financial Crimes Enforcement Network (FinCEN). 

Pump and dump schemes are illegal in stocks. But in general, current laws regarding pump and dump schemes don’t apply to cryptocurrency exchanges and coins that aren’t classified as securities. This could change in the future, but for now, the regulatory vacuum creates a gray area in which pumps and dumps operate in cryptocurrencies. 

Crypto Pump and Dump Schemes: What to Do When They Happen

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