The Dutch Authority for the Financial Markets (AFM) has issued a warning about the rising number of investors being scammed by pump-and-dump schemes in the cryptocurrency market. This form of market manipulation will be officially banned by the upcoming Markets in Crypto-Assets Regulation (MiCAR), set to take effect on December 30, 2024.
Let’s explore the much-anticipated MiCAR regulations that aim to safeguard investors like you!
Pump-and-dump schemes occur when organizers artificially inflate the price of a cryptocurrency by spreading false information, often through social media. Once the price rises significantly, they sell their holdings for a profit, causing the price to crash and leaving other investors with heavy losses.
How it Works
The AFM explained that pump-and-dump schemes create a false sense of excitement around a cryptocurrency. As more people buy in, the price increases, allowing the organizers to sell at a high point. Regular investors then suffer losses as the price quickly falls.
Investigations by the AFM have identified clear patterns of market manipulation driven by social media activity and artificial price spikes.
The new MiCAR regulation aims to better protect investors and increase transparency in the crypto market. While the AFM supports this regulation, it has also pointed out that MiCAR alone won’t eliminate all risks associated with cryptocurrency trading. The market will remain volatile, and investors should still be cautious.
AFM’s Advice: Stay Cautious!
Even with MiCAR on the horizon, the AFM reminds investors that cryptocurrency trading is risky. They advise people to invest carefully, avoid acting on hype, and do thorough research before jumping into digital assets.
As MiCAR’s implementation approaches, pump-and-dump schemes are still a priority for regulators. The new rules are a step toward cracking down on market manipulation, but investors must continue to be aware of the risks in the evolving crypto market.
Is MiCAR enough to curb crypto fraud? Or are more drastic measures needed?
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