A massive cryptocurrency pump and dump scheme took place over the last month involving a low value, little known cryptocurrency called ChainCoin. ChainCoin's price rose from $0.05 USD to $6 USD within a week and subsequently collapsed to $0.50 USD two weeks later. Here's how it happened.
[CHC at $0.06 USD] First week of July - HighOnCoins starts pumping ChainCoin internally
An idea was spread around the HighOnCoins Slack channel by Zedomax, the host and owner of the HighOnCoins YouTube channel, to start buying large quantities of ChainCoins. At this time, one ChainCoin was worth $0.05 USD and it was only tradeable on two low-tier exchanges, Cryptopia and Nova Exchange. ChainCoin had close to zero trading volume.
ChainCoin was largely abandoned by its developer community months ago. The official Twitter and Github accounts had been inactive for at least a month and many 2017 roadmap targets were missed with no updates provided.
[CHC at $0.20 USD] July 7th - Release of the "Buy ChainCoin $CHC" video
Zedomax releases the "Buy ChainCoin $CHC" video on the HighOnCoins YouTube channel. He urges viewers to buy ChainCoins and setup masternodes with them. To run a masternode, one needs 1000 ChainCoins in a wallet. The masternode rewards the user with ChainCoins as new ChainCoins are mined. Zedomax claims that ChainCoin will reach $100 if everyone buys and no one sells and those with masternodes will make a steady, decent income.
It's important to note that the cryptocurrency market recently transitioned from a bull market to a bear market and many people lost money. According to Zedomax, this was caused by whales (traders with large amounts of capital) manipulating the market. He believes the ChainCoin movement will be an anti-whale movement and the "people will control the price of the coin". If everyone bought and held the coin, its price will stabilize and grow.
Zedomax calls this movement the "Pump and HODL" movement. HODL really means HOLD but purposefully mispelled. The term is used in the cryptosphere (typically as a joke) to indicate bullish enthusiam.
Already, one should be able to see two flaws in the "Pump and HODL" movement:
- ChainCoin is fundamentally a low value coin. It has no innovative features, no developers, and no following. There are zero reasons to use it over any other popular coin. A pump of ChainCoin's price will always be unsustainable and the market will eventually correct.
- From the moment the "Pump and HODL" movement was announced, ChainCoin had its whales. These whales were none other than Zedomax and his Slack channel who bought large amounts of ChainCoins for cheap. The "Pump and HODL" movement was not a movement by the people, it's a movement completely controlled by Zedomax and his Slack channel who stood to gain tremendously.
Clearly, Zedomax was appealing to amateur investors who didn't understand free market principles, didn't understand cryptocurrency fundamentals, and were hurting from the ongoing bear market. Could there be a better group to dupe into joining the movement?
Sure enough, after the video's release, people started buying ChainCoins and its price rises dramatically. This starts a positive feedback loop as the rising price gets more people to buy, and the more people that buy, the more the price rises. All the while, ChainCoin's whales sat in the sidelines patiently timing their exit.
[CHC at $6.81 USD] July 14th - ChainCoin's price reaches an all time high at $6.81
The cryptosphere was abuzz with ChainCoin. Many people seemed to really believe in "Pump and HODL". YouTube and Reddit comments were filled with optimism calling for everyone to buy and HODL. Fundamental analysis and value investing were cast to the wayside as everyone eyed ChainCoin's rising price.
At the same time, Zedomax continues to release videos urging viewers to buy and hold ChainCoin. Other questionable cryptocurrency YouTubers also sign on to the movement and release similar videos pushing viewers to buy. For example, Youtuber Suppoman2011 posted a video on July 9th titled "Why my Cryptocurrency Community think YOU NEED to invest in Chaincoin (CHC) Today! 🔥". Another Youtuber, Crypto Trading Pro, posted a video on July 9th titled "Will Chaincoin (CHC) Make You a Millionaire?".
[CHC at $1.87 USD] July 15th - First price crash, more YouTube videos
After reaching an ATH the previous day, ChainCoin's price crashes to $1.87. At the same time, Zedomax releases a polished YouTube video introducing the Pump and HODL movement. Instead of the usual smoking, alcohol, and fidget spinners, Zedomax is well dressed talking in front of a green screen. Here are some comments from the video.
This was also the day YouTuber Fish the Beach Bum Investor posted a video titled "Chaincoin - Did you pay U.S $6,000 for 1 node and HODL? Well Done says the Math!" Well done! Well done for buying garbage and giving me money.
[CHC at $4.40 USD] July 17th - Price recovers slightly
ChainCoin's price recovers to $4.40. ChainCoin hodler optimism remains high as Zedomax and many other YouTubers continue to push their viewers to buy more ChainCoins.
[CHC at $2.28 USD] July 18th - Rubbish commits on ChainCoin's GitHub repo
As mentioned before, ChainCoin's GitHub repo was bereft of activity for many months before Pump and HODL. Now that people were buying the coin again, developers seemed to be returning to the project... or were they? 6 commits made to the ChainCoin repo on July 18th consisted of completely superficial changes. These included inane code commenting and typo fixing.
[CHC at $1 USD] July 20th - ChainCoin's price crashes and Zedomax blames hackers and whales
ChainCoin's price crashes to $1. Zedomax posts a video saying he's hurt people are abandoning the movement. Here's a quote from his video:
"If you quit now and we do succeed with the experiment. I want all of you guys who turned on me to come and apologize, alright? Because I'm really hurt at this point. Because a lot of people that have been hodling, they just can't get through the battle, and, and I feel really hurt. I still believe in the movement. I'm not a scammer."
Zedomax also claims that hackers have been attacking the movement by closing down its Slack group and DDoSing ChainCoin's official website. He calls these hackers "racist haters". He tells people to hold up ChainCoin's price by putting up buy walls and stop the selling. Ironically, buy walls are exactly what a whale would want if s/he was dumping the coin. This was a blatant transfer of wealth from the foolish to the nefarious.
Besides blaming supposed racist hate groups for attacking the Pump and HODL movement, Zedomax brings out the "whale" card again and blames them for manipulating ChainCoin's price. Well guess who are the whales this time? Could they be Zedomax and his HighOnCoins Slack group that were able to buy huge amounts of ChainCoin when it was dirt cheap? His followers didn't think so and continued to put up buy walls to "fight" the whales.
Here're a few comments on Zedomax's video:
[CHC at $0.56 USD] July 22nd - ChainCoin's new strategy
Zedomax uploads a new video telling viewers to stop the buy walls and let the price tank. He states that this would hurt the whales as they won't be able to sell at a good price. This might make sense except for the fact that his followers have been putting up buy walls for days on end. Any whales that wanted to cash out would already have done so.
This video pretty much spelled the end of the movement. More and more people realized ChainCoin was hopeless and its price was never going to return to its previous highs. Those that bought at those levels and held their coins lost large sums of money. Many cryptocurrency YouTubers with more integrity who had originally treated the Pump and HODL movement with intrigue started to declare the movement a pump and dump scam. Like many others, they knew there was something wrong with the movement but were hesitant to call it a scam given its popularity. Once the price collapsed, there was no doubt that Pump and HODL was one big scam.