BaFin Warns of Crypto Trading Advices on Social Media

The Federal Financial Supervisory Authority in Germany (BaFin) issued a warning on crypto trading advices on social media. Although there was no direct reference to the social media channels, telegram is one of these sources.

BaFin did provide its principals for any investor that wishes to use social media for investment tips.

BaFin’s Advice on Social Media Tips

The amount of followers, likes or positive feedback are not valid indicators. They do not reflect the performance of the investment tips. It is very easy to manipulate results in social media. Positive feedback or references related to investment success stories can be fictionized and produced at the author’s request.

Investment tips are often marketed aggressively in social media. The goal is to make investors fear of missing out (FOMO) and push them into making poor decisions. Always check the investment advice to ensure the risks and opportunities are fully understood.

Investment advices on social networks are mostly free. This means that the author is compensated through other sources. Most of the time they earn a commission from the broker that its products are advertised in social media. For regular users it is difficult to detect. Bear in mind that such commission models that can be the ulterior motive for the individual providing the advises.

There is no ‘fast money’ that is ‘100% safe.’ If you are promised high profits rest assured that the risk is extremally high. The financial products that may offer such returns are highly speculative in most occasions. This can result in significant losses including the entire invested capital.

Caution is advised if only success stories are highlighted without the risk involved.

‘Pump and Dump’

There are dedicated telegram groups that ‘pump and dump’ cryptocurrencies. These groups coordinate their trades, targeting low-volume cryptocurrencies. When the price jumps higher, investors that are unaware of the scheme buy the cryptocurrency. The groups’ members then sell their cryptos for a hefty profit.

The Australian Securities and Investments Commission (ASIC) has been cracking down on these groups.

   
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