Shilling is a crypto slang that means promoting a cryptocurrency because you were paid or to encourage a pump and dump. A crypto pump and dump is a type of scam where individuals or groups deliberately inflate a cryptocurrency's price and demand by spreading false or misleading information to increase the price.
In this post, we explain what shilling is, how it works, the types of shills to look out for, and how to identify shilling.
What is shilling in crypto?
Shilling is when a person or group promotes a particular cryptocurrency to create excitement, generate interest, and push people to buy/invest/trade it.
The aim of shilling is to create enough hype that leads to mass buying, which increases demand as well as the price of the cryptocurrency.
Typically, the creators or team behind the cryptocurrency collaborate with celebrities and social media influencers to reach potential traders faster and quicker.
How does shilling in crypto work?
A person who engages in shilling is knowns as a 'Shill.'
Crypto shills typically have Twitter, Instagram, Youtube, or other social media accounts with medium-to-large followings. They are often paid by a cryptocurrency creator to advertise or promote their token.
Most times, these shills do not tell their followers it's a paid advertisement, and some of them even own the tokens themselves and are trying to set off a pump and dump to sell their crypto at a high price (before it inevitably crashes).
Types of people to look out for who could be shills
While some crypto shills advertise cryptocurrencies in obvious ways with overhyped and rather unrealistic promises of profit, others are more subtle.
However, whether the shilling is as blatant as someone saying, "Hey! Buy this coin right now if you want to make 100% profit in the next 24 hours", or as subtle as someone giving "smart financial advice," the goal is the same.
The more people invest, the more the demand for the token rises, and the more the price increases.
Here are the three types of shills to look out for:
1. The Influencer/Celebrity
The red flag: When an influential person suddenly starts promoting a cryptocurrency to their followers and the public, especially when they haven't shown any interest in the crypto market before.
In the crypto space, influencers are everywhere, and while some share genuine advice, many are shils. Sometimes, these influencers may not be into crypto and were just paid to advertise a token.
They will promote the crypto token or project to their followers without necessarily offering good or adequate reasons regarding why they're promoting this unknown/new token, other than you can make "lots of money" from it.
It is commonly said, 'not all influence is a good influence,' and it also holds true in the crypto world. Celebrities are often caught in the shill web. They wield double the social power influencers have, and people are twice as likely to listen to their favorite celebrity.
An example is the Kim Kardashian crypto shilling case from October 2022. The U.S. Securities and Exchange Commission (SEC) charged the reality star $1 million for promoting a token called EthereumMax (EMAX).
2. The Investor-Shills
The red flag: When an investor is hyping up the profit you could gain rather than talking about the use or function of the cryptocurrency.
These shills typically invest in a cryptocurrency and work hard to attract potential traders to buy a token as well. They often focus on telling you about the money you could make rather than explaining how the cryptocurrency actually works.
Once these traders buy enough to increase demand and, of course, the token's price, the investor-shills who promoted it sell their cryptocurrency quickly and make a lot of money.
As we mentioned in the introduction, this kind of scheme is called a "pump-and-dump." It leaves the investors and traders who bought the cryptocurrency at a high price with a coin that is now worthless.
That's why it's crucial to carefully read the whitepaper (a document explaining the cryptocurrency's goals and technology). By doing this, you can protect yourself and make more informed decisions about investing in cryptocurrencies.
3. The Excited Founder Or Team Member
The red flag: The team or founder makes unrealistic or impractical promises about their project or cryptocurrency. If there's hype and hurry without a well-documented white paper or roadmap, you might be looking at a shill.
While some founders genuinely strive to create a useful project, the crypto world has its fair share of scammers and people with unrealistic expectations. They make promises about groundbreaking technology, use cases, or problems that blockchain can solve. They often use trendy buzzwords and target popular areas of interest to attract investors.
It's not necessarily as malicious as a paid influencer or investor trying to make a profit, but it's still worth recognizing that a person might be overselling their project.
Recent examples of shilling
In October 2022, the U.S. Securities and Exchange Commission (SEC) charged reality star and influencer Kim Kardashian for allegedly promoting a cryptocurrency called EthereumMax (EMAX).
Kim Kardashian agreed to pay $1.26 million to settle the charges and not promote any cryptocurrencies for three years.
Other celebrities involved in the promotion of EMAX, an Ethereum-based token, included superstar boxer Floyd Mayweather Jr and former NBA star Paul Pierce.
The price of EMAX hit an all-time high of $0.000000597636 in May last year after the token gained 1,420% in value in a single week. However, the coin crashed quickly after and is currently worth $0.000000001142.
Shilling in the crypto space means promoting a cryptocurrency to get people excited and invest in it. Shilling tactics can include influencers endorsing the cryptocurrency or the founders making promises that might be too good to be true.
To avoid being a victim of shilling, you always need to do your research and be cautious about any cryptocurrency project being promoted. Before you buy that crypto, here are five questions to ask:
- Who are the creators of the token or coin?
- Does the coin or token have an official website and social media page?
- What is the purpose of the token/coin?
- How many holders does the crypto coin/token have?
- What is the liquidity and transaction volume?
Disclaimer: This article was written by the writer to provide guidance and understanding of cryptocurrency trading. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.