There is a hidden dynamic between — some — crypto developers, exchanges, influencers, and coin rankings sites. Most retail users are unaware of this. Which is why you should know about it.

Note: The following is an example to illustrate different processes and relationships. The original idea comes from Nic Carter. I simplified his approach to make it easier to understand what is going on.

🧐Here is what you see

A new cryptocurrency is being developed. You first read about it in a post from a crypto influencer who has a good track record. The influencer lists a few of its features, claiming that it will become a top performer in the future.

You also watch a few YouTube videos and then check out the project’s site and read the whitepaper. It has a solid use case, nothing special. Good partners. No obvious red flags.

You decide to add this project to your list of potential investments.

A few weeks later.

The project gets listed on a few small exchanges. Unlike many other coins, it doesn’t dump right away. More people share their opinion on why this is a good investment.

You decide to buy some coins.

Every day you visit a cryptocurrency ranking page to follow the price development, hoping the project will climb higher. You are happy to see that the ranking page features the project as one of the most exciting newcomers.

More people invest their money into the coin. Everyone is now talking about it.

Two weeks later you sell all your holdings for a +150% profit. Happy end.

🙈Here is what you didn’t see

The developers pay the influencer whose tweet you saw (and many others) to shill their new coin. By doing so they generate attention for their project and rake in more investments.

They also pay the exchange to list their coin. The project profits from the liquidity coming from the exchange’s users. This allows the developers to sell some of their own holdings. The listing generates more fees for the exchange.

The ranking page lists the new coin. Developers and crypto exchanges inflate some of the numbers they submit to the ranking site to make it climb higher in the rankings.

The developers pay the ranking page to feature their projects. More people become aware of it and thus provide more liquidity.

The exchange pays the ranking site affiliate fees for people it refers to the exchange. More people buy the coin. The exchange earns more fees.

See how all of this works?

⚠️The takeaway

With this description, I don’t want to assign blame. I want to draw attention to a little-noticed fact.

As I said, only some of the actors in the crypto space use these methods. However, it is difficult to say how many there are. Because these processes are difficult to prove and are often located in a legal gray area.

In any case, they are not interested in your profit but in their own. But they need you to pump more liquidity into the system.

Be aware of this before you invest in the next coin.