Guide to anti-dumping policy and how it benefits crypto users

A pump-and-dump scheme is one of the most damaging scams for crypto investors worldwide and it’s so common that investors need to be on guard at all times. That’s why the anti-dumping policy is being proposed to markets and networks alike. This can be the secret to securing a digital asset’s financial stability moving forward. 

Key takeaways

• Anti-dumping policy in crypto is a security practice dedicated to combating pump-and-dump schemes.
• The policy involves limiting buying and selling capabilities or taking away supply from circulation. It helps maintain market growth at a stable pace. 
• The anti-dump policy is presented with challenges revolving around its imposed limitations. It can stifle growth in the blockchain’s development and economy alike.

An anti-dumping policy restricts crypto holders from setting up selling limits and vesting periods to avoid market manipulations. It aims to keep the market steady and make investors feel safe. Several entities and network developers can implement an anti-dumping policy, its community, and exchanges. Terms and conditions can vary to be specific for their respective ecosystem. 

Pump-and-dump: The problem the policy seeks to solve

The anti-dump policy was created to combat what is commonly known as the ‘pump-and-dump’. It involves a fraudster buying a large crypto supply to control its market price artificially. They then sell them in bulk once the market is up and the demand is high enough to ensure that they can be sold or converted easily. 

Such a practice is harmful to other traders because the dump essentially drops the pretence that the asset is popular. What’s left is that the fraudster who held most of the supply gets to liquidate their assets by selling them to newcomers to the crypto market. However, these newcomers can’t resell the asset as effectively and realise too late that the demand is lower than they are led to believe. 

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A deeper dive into the anti-dumping policy

There can be different ways to structure an anti-dumping policy crypto guideline. They can use various tools offered in the blockchain. For example, Ethereum (ETH) has a fee-burning protocol to maintain token scarcity in every transaction. It can be unique for every asset but they all practise the following processes:

Buying and selling restrictions on platforms

The simplest way to combat dumping is to simply limit how many assets a user can buy or sell in a limited time. Crypto can be traded in bulk but only up to a certain amount and will have to wait until the duration is over before they can buy/sell again. Doing this lessens the volatility of an asset which is not ideal for most traders but perfect for investors of dapp projects. 

Smart contract token vesting

Token vesting involves storing assets to be released at a later date. It means you can sell/buy in large quantities but only in a controlled time. This can work in different contexts using smart contracts. Some can lock the assets after it is freshly minted so they can flow in circulation later. It can also be implemented for individual traders who are investing big money in the network but have to agree that they’ll get their assets later rather than instantly. 

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Buyback option and processes

Buyback means that the exchange or the network can offer to buy its assets, effectively removing it from circulation. This is possible with smart contracts or at exchanges like Binance and Nexo. It can happen if the depreciation of the token’s price is expected because of inflation. Buying back the tokens lowers supply, effectively balancing it with the current demand. 

Challenges of the anti-dump policy

The anti-dump policy is a good step towards good cryptocurrency security but it’s not flawless. No matter how specific or flexible it is, there will always be concerns that challenge its effectiveness. Here are three of the most crucial ones and why they must be addressed for traders’ and investors’ sake:

Crypto volatility makes it difficult to set fair market value

Crypto prices fluctuate greatly in short times as to be expected from such volatile markets. However, this is exactly what makes it difficult to define what an anti-dump policy should be. It’s meant to prevent or respond to sudden price drops because it’s the hallmark of a dumping scheme. However, it can also be a market correction that policy can’t or shouldn’t affect. 

The nature of volatility and its similarity with the hallmarks of a pump-and-dump scheme make for an interesting case that makes policies unreliable if not implemented correctly. Therefore, you should always be careful as an investor even if there are mandated security measures in the network. Only you can protect yourself from pump-and-dump in crypto.

Global cooperation to practise this policy

Developers and exchanges alike are still trying to find a unified answer to ‘what is anti-dumping policy crypto?’. Having a common answer can help in implementing proper measures that everyone can agree with and traders can apply the same practices in every network. As it stands, everyone has a different answer, making it next to impossible to have a common policy.

Innovations can be slowed down

Many developers don’t want to implement an anti-dumping policy because this halts innovation in the blockchain space. The surge of new users or big investors is often the key to an ecosystem’s growth and limiting it can lead to slow and otherwise negligible progress. If that happens, then the network will fail to show significant results to impress investors. 

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