In mid-May, the price of the Enzyme cryptocurrency rose sharply before falling, with a very high trading volume. A group of speculators lured many individuals to buy while selling the crypto on their behalf.
Some speculators are stirring up the cryptocurrency market, which is currently going through a complicated period. A cryptocurrency whose price suddenly jumps before falling: speculators, organized in groups, no longer hesitate to start lightning operations to artificially inflate the value of these highly volatile digital assets and quickly reap profits.
On May 15, an obscure cryptocurrency, Enzyme, went from $ 45 to $ 26 in a few hours, with a very large amount of transactions. A few hours later it plunged and is now only worth about $ 27.
At the beginning of this movement: a Telegram messaging group where several investors chose their targets before intervening.
“In the stock markets, it’s illegal, but criminals are taking advantage of the less stringent regulatory framework for cryptocurrencies,” explains Mircea Mihaescu, of the specialized firm Coinfirm.
In the stock market, there is also a specific term for talking about this kind of practice: it is the “boiler room” or technique of the boiler. This involves distilling false information (and / or strongly encouraging many individuals to buy a security) to drive up the price of an asset (where an asset is already invested) and resell it quickly for more value. New investors, on the other hand, are most often at a loss after buying at the highest level. Price manipulation prohibited in regulated markets, but this prohibition does not apply to cryptocurrencies.
To give more scale to their action on the enzyme, investors in the Telegram group also used a general public social network, Twitter in this case, to encourage other people to invest as well.
“Whales (nicknames of big investors, editor’s note) gather lots of MLN (the abbreviated name of Enzyme in the markets, editor’s note), it’s worth a try,” tweeted a certain Cryptosanta, for example.
Enzyme Finance, the company that manages the cryptocurrency, tried to calm things down, warning of being wary of “fake accounts” that were suddenly trying to inflate its value. But it was too late, and many investors had already embarked on a perilous process: Buy and sell fast enough before the soufflé fell and demand dried up.
A phenomenon that is not isolated
Almost everything is lost because in these schemes it is important to act very quickly. For the enzyme, the bullish push actually lasted only a few minutes, and the only ones who had a chance of not losing money were the initiators of the movement. “In all these manipulations, everyone is convinced to be” the one who will benefit from the price increase, “explains behavioral economist Stuart Mills of the London School of Economics.
The phenomenon is not isolated. Other groups are promoting a similar operation in the coming days. According to computer scientist Matt Ranger, most of these actions are launched by people who are, above all, strong marketers.
“You do not need to know how to write a line of code,” he points out. You just need to know how to write messages that resonate with investors in cryptocurrencies, for example, by addressing the theme of the failure of major financial institutions.
“My turn to fool the others”
Conspiracy theories abound, and some suspect large U.S. mutual funds of having orchestrated the current sinking of cryptocurrencies, then buying them at a good price.
“Suddenly, all this unethical behavior becomes more justified” with these theories, Stuart Mills notes. For the speculators say to themselves: “I was fooled, so it’s my turn to cheat the others”.
However, the recent decline in the demand for cryptocurrencies and the consequent fall in prices make these operations even more dangerous.
“The only purchase orders come from these people on Telegram or Twitter,” warns Matt Ranger. So at some point, without any real demand from lamba investors for the targeted cryptocurrency, “everything collapses,” he stresses.