Anatomy of a "pump and dump" scheme

Updated: Sep 17

Jeff Hulett, February 23, 2021

I recently saw a wise quote from Bill Gates. This came during an interview about his new book, How to Avoid a Climate Disaster.

“Elon has tons of money and he's very sophisticated so I don't worry that his Bitcoin will sort of randomly go up or down,” he said “I do think people get bought into these manias who may not have as much money to spare, so I'm not bullish on Bitcoin, and my general thought would be that if you have less money than Elon you should probably watch out.”

Said another way, don’t be on the wrong side of a pump and dump scheme .... and the right side is akin to catching a falling knife!

This reminds me of the classic pump and dump schemes in history. Whether it is tulips, dubious dot coms, real estate, or bitcoin. The symptoms are classic and often ignored. We tend to be blinded by our emotions and are like a fly to light, wanting to believe "This time it is different." I do hope crypto currency and block chain are different, but more time is needed to tell the story. Crypto has significant challenges. It needs to become a "real" store of value and the underlying "proof of work" algorithms need to become much more efficient. Smart people are working on it, including central banks. It will take time and likely after the Bitcoin mean reversion.

Your Personal Finance Journey Guide:

Core Concepts

1. Our Brain Model

2. Curiosity Exploration - An evolutionary approach to lifelong learning

3. Changing Our Mind

4. Information curation in a world drowning in data noise

Making the money!

5. Career choices - They kept asking about what I wanted to do with my life, but what if I don't know? - Part 1

6. Career choices - They kept asking about what I wanted to do with my life, but what if I don't know? - Part 2

7. Career success - Success Pillars - Maximizing luck with an adaptable mindset to reach your goals!

8. Career choices - Do I need to be a Data Scientist in an AI-enabled world?

9. Career choices - Diamonds In The Rough - A perspective on making high impact college hires

Spending the money!

10. Budgeting - Budgeting like a stoic

11. Car Buying - Auto buying and financing thoughts from a Behavioral Economist, a Banker, and a Dad

12. College choice - The College Decision - Framework and tools for investing in your future

13. College choice - College Success!

14. College choice - How to make money in Student Lending

15. Event spending - Wedding and event planning guiding principle

Investing the money!

16. Investment thoughts for my children

17. Using the Stoic's Arbitrage to choose a great investment advisor

18. Anatomy of a "pump and dump" scheme

19. The Time Value of Money Benefits the Young

20. How Would You Short The Internet?

Pulling it together!

21. Capstone - The Stoic’s Arbitrage: A survival guide for modern consumer finance products

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