Crypto Pump and Dump: How to Avoid Scams?

2022-06-16 2022-05-26
Crypto Pump and Dump : How to Avoid Scams ?Crypto Pump and Dump: How to Avoid Scams? | Litefinance

Oleg Tkachenko

logo 2022-06-162022-05-26 The Pump & Dump scheme appeared hanker before cryptocurrencies. presumably, it came from the stock grocery store. It can be explained by the fact that the organizer of the pump and dump operations chooses a low-liquid asset with a systematically moo cost and artificially accelerates the price, skimming the cream at the peak. person considers it a scam, while others, on the contrary, take part and enjoy the excitation. In this article, we will explain how a pump is created, how to recognize a pump using examples, and how traders can make money on it .

What is Pump and Dump?

Cryptocurrencies are a relatively newly type of asset, but the number of strategies invented for them is already impressive. The trade approaches can be divided into three groups :

  • The ones based on technical foul analysis : trade on patterns, defend and resistance levels, Fibonacci .
  • The ones based on cardinal analysis : trade at the start and end of forks, based on news from developers .
  • The ones based on psychology: trading by understanding the principles of market participants’ actions (“hamsters”, “whales”).

The Pump & Dump system could be classified as the third gear type of strategy, but it is better to call it a branch category. many consider it a scam – on the Internet you can find the definition of “ pump and dump fraud ”. Yes, it is, but who said you can ’ t take function in it ? Pump & Dump is a scheme built on the artificial sharp growth of the cryptocurrency due to the coordinate actions of the participants, followed by a price crumble. Pump & Dump can be compared to hype – these are besides pyramids in a sense, but this does not reduce the number of people who want to participate in them. It ‘s all about exhilaration, from which traders get no less pleasure than from a successful consider. indeed, money is not always the finish – deal can be exciting and sometimes the feel emotions are much more valuable than money .

How do Crypto Pump and Dump Schemes Work?

The organizer ( pool of organizers ) makes every feat to popularize the token. Within a few days, prices grow by 100 % or more. then the organizer collects the profit after selling his coins. theoretically, this scheme is organized as follows :

  • The personal digital assistant of the pump ( person or group ) selects an asset. It should be a cryptocurrency with a static sidelong tendency, which means investors are not concern in it. The coin should cost a few cents and be far from the top, but have an interesting caption behind. Most much, little-known tokens are chosen for the plunge scam .
  • A mint is bought in small volumes – indeed that there is no previous growth. At the same time, a news backdrop is being formed in the media and on forums. The organizers are besides engaged in active advertise – they praise the cryptocurrency, predict future success for it and attract more participants to purchase .
  • At the start of the pump, organizers invest in the asset so that the monetary value moves up. Warmed up by the informational background, traders buy a coin, the price accelerates even more – the demand for cryptocurrency increases .
  • At the flower of the first pump wave, the organizers partially satisfy the demand of the “ hamsters ” and sell a big total of cryptocurrency. The price moves down .
  • The organizer allows the monetary value to drop to a psychologically agreeable grade and buys the coin again, provoking a second base wave of emergence. Traders see growth and think that there was a correction .
  • The second wave is normally higher than the inaugural and at its peak the organizers wholly exit the market. however, the number of waves depends on the organizers themselves .

This is an example of a hidden Pump & Dump when only the organizers know about the emergence. The rest of the participants are merely being used, sol be careful if you see unreasonable praise of some little-known coin sol as not to become a participant in this kind of handling. The crypto residential district on the Net is full of advertisements for chats and groups inviting people to unite, create a heart and earn money. The organizers of such Telegram channels use the ability of tens of thousands of participants and much earn not only on the Pump & Dump scheme, but besides on pay up access to their secret single chats. such actions in the stock market ( this is where this strategy appeared ) are considered imposter, but this is arguable. Each agent warns the trader about the likely risks of losing the deposit, and every trader accepts them. such traders are driven by the hope for easy money, but they don ’ thyroxine perform a detailed market analysis and miss cognition. They lose money entirely because of avarice, so who is to blame ? In accession, most of the pump participants know what they are involved in .

Examples of Pump and Dump

theoretically, pumps should have an personal digital assistant who coordinates the pump and deck group and provides the necessity information. But there are examples of ad-lib pumps, the “ ignorant ” organizers of which are media people. such pumps can be called “ involuntary ” because it is impossible to prove their purpose. Besides, everyone understands that celebrated people merely do not need pumps – there ’ sulfur no sharpen for them to earn money in such a way. But one fact is undeniable : a few words are enough to pump unpopular cryptocurrencies. A few examples of consistent and “ media ” pumps in the cryptocurrency space are discussed below .

1. E-coins

On February 6, 2018, the little-known cryptocurrency rose in price by 4,742 %. It took the cryptocurrency inauguration just one day to break into the TOP-100 from the survive places in the TOP-500 in terms of capitalization, and even enter the TOP-20. Interesting to note, at that meter the cryptocurrency market was in stagnation. Bitcoin even tested a patronize partition, falling below $ 6,000. indeed why would people invest heavily in such an unattractive project ? There was about no data about this coin, not to mention the interest from investors. The latter is confirmed by an about absolutely flat schedule for 2017 – even during the menstruation of a herculean tide in the cryptocurrency market since the spring 2017, no one cared about E-Coin .

2. Quark 

This is a dear exemplar of a two-wave pump. The project itself is of little interest to anyone. It was supposed to be another analogue of Bitcoin, but investors promptly forgot it, as evidenced by the monetary value chart. Growth in January 2018 is not a pump .

3. U.Cash 

This is not quite a heart, but this case is worth mentioning – the nature of the chart and the psychology of traders are identical here. The cryptocurrency appeared less than a calendar month ago, and, as it frequently happens with startups, at foremost it actively grew ( scalpers ’ attack to capitalize on the hype around a modern project ). then the price collapsed, and the second wave of the pump followed. Usually, after the beginning receding, the stick out is no longer interesting to anyone. here we can say for indisputable : person ( most likely developers ) implemented the Pump & Dump tactics. After the irregular wave, the price of the coin went down – that was quite predictable .

4. The power of Elon Musk’s words

Elon Musk has repeatedly proven his determine on the cryptocurrency market. But if the local price shifts of the BTC or DOGE are more of a fundamental reaction to Musk ’ s announcement regarding these coins, the following examples can not be explained differently than by a “ pump ” .

  • Santa Floki ( HOHOHO ). At the goal of December 2021, Elon Musk twitted a selfie with his puppy named Floki, whom he dressed up in a New Year ‘s costume. It is unmanageable to say how users were able to associate HOHOHO with this fact, but the cryptocurrency worth 0.00000065 USD grew by more than 5,000 % in a few hours. And it collapsed just as quickly. A few months late, the project was wholly removed from the list, but person managed to make good money on it .

It is worth noting that Elon Musk ‘s puppy acted as ‘ a pump driver ’ several times. In September 2021, his mere appearance in the family of a billionaire led to a spontaneous growth of 1,300 % of the Shiba Floki ( FLOKI ) mint. The list of the puppy was invented back in July, so it is improbable that such a rapid increase in the coin ’ south price of a coin with a rat below 2000 could be associated with Musk ‘s desire to make money .

  • VikingsChain, Viking Swap and Space Vikings are besides ill-famed examples. In early November 2021, these coins went up by about 350 %, 3,700 % and 600 % respectively after Musk posted several tweets about the Moon and the Vikings. Elon suggested that the Vikings were the first to land on the moon. Did he relate to these coins ? There ’ s no attest of that. however, the coins, which are in no way connected with either the Moon or the Mask, have risen sharply in price .

Do not confuse Pump & Dump with natural volatility. Let ’ s observe the case of the TRON cryptocurrency for you to see the dispute. At beginning glance, we see a pronounce pump here, but it is not. Please notice : the coin is in the TOP-20 in terms of capitalization. To pump such a token, that is, to influence the cryptocurrency rate, you need a distribute of money, and institutional investors ( “ whales ” – cryptocurrency exchanges, mining pools ) work according to wholly different schemes. And the moment point : the growth of the coin coincided with the uptrend on the entire cryptocurrency grocery store, the capitalization of which in early January exceeded $ 850 billion. Below, there ’ s one more example of how price spikes after the statements of celebrated people, but it ’ s a quite natural growth than a pump. At the end of October 2021, Mark Zuckerberg announced the rebranding of Facebook Corporation to Meta with a represent change in the company ‘s growth strategy. The Metaverse segment was chosen as the main goal : they started building a metaverse based on virtual and augment reality technologies. like startups of a smaller scale already exist, particularly in the cryptocurrency global. Crypto mataverse users buy and sell virtual domain linked to NFT tokens and even issue mortgages for such lots. It is logical that some metaverse-related coins immediately grew in price : Decentraland ( MANA ), Sandbox ( SAND ), Metaverse Miner ( META ), Metaverse ( ESP ), and MetaverseX. Compare the two charts. MANA : Decentraland is one of the leaders in the metaverse section. After a sharp increase in the inauguration ’ south popularity, a discipline came. But tied after a few months, the price has not returned to its previous level. consequently, we are not talking about pumps hera. Metaverse Miner ( META ) : We see a clear pump here : a sharp rise followed by a rapid fall below the original position. Metaverse Miner is an unknown “ debris ” coin, the growth of its respect is a consequence of the general ballyhoo on the wave of the metaverses, which passed relatively promptly. Both of these charts show that the same fundamental factor can cause both price growth of a promise cryptocurrency and a pump. In the first sheath, a long-run investor can earn, and in the second – he will lose his money with 100 % probability ( unless he manages to withdraw money before the cryptocurrency dump ) .

Pump & Dump features

It is relatively simple to identify Pump & Dump : price jumps have no cardinal reasons and are not in synchronize with the general cryptocurrency commercialize swerve. long-run investors are not concerned in projects with capitalization of some tens thousand USD ; so these start-ups are the most matter to for pumpers.

Features of pump :

  • sharp price surge and multiple ask orders without any significant fundamental reason;
  • the quotes grow on a single platform, without any rise on other exchanges;
  • ads and tips to buy the cryptocurrency on the Internet chats, forums and social communities.

It is all-important to see the remainder between a pump and a price spike as a leave of fundamental factors :

  • Pumps are targeting “ debris ” coins worth less than a cent — they are out of the CoinMarketCap ’ s Top-1000 rat. It is difficult to pump coins deserving tied a few dollars — much more money should be used to affect the price importantly .
  • Any cardinal rise in price is based on some logic. Investors buy an asset not for the purpose of a quick profit – they see the establish for further development and potential benefits for users .
  • During a pump, the price can spike by 300-500 % or more in a few hours. Growth by 1000-3000 % in pump & dump schemes is a common affair. fundamental price increase rarely exceeds even 100-200 % .
  • After a natural spike, the coin price always reverses. But when it comes to pumps, it returns to the former levels. During fundamental growth, the token price falls lone partially, and investors manage to get some profit .
  • Dumps and pumps last for a few hours or days. discipline after fundamental growth can stopping point respective weeks .

Organized Pump & Dump has picked up popularity recently. It is based on that everybody, wishing to take contribution in the project, joins the community, where organizers share the information about the approaching Pump, concealing until the last, what mint will be pumped. large exchanging platforms don ’ t recourse to these activities. First, they don ’ thymine engage little cryptocurrencies ( and it is difficult to pump large ones ). second, they try to restrict alike strategies. however, there are some exceptions. For model, Bittrex and Yobit are one of the largest pump platforms. Telegram is used as a messenger for Pump & Dump, because of its throughout encoding, it enables creating individual chats and channels, providing its members ’ confidentiality. The largest communities include Pump Notifier ( about 27,000 of people ), PumpKing Community ( about 14,000 people ), Crypto4Pumps ( about 16,700 people ), AltTheWay ( abou 8,960 members ). The issue of group participants can change. In exercise, the Pump looks like this :

  • the scheme organizers inform about the certain exchange and the cryptocurrency at the scheduled time. Promoters (scheme participants) immediately start buying the coin out. That is how the first Pump wave emerges. It is preceded by a simple news bit, like an update by the Web site developers.
  • the participants of the first wave lure outsider investors-”hamsters”, who push the price higher, and then, they make up the second wave;
  • As soon as outsiders enter the market, the group organizers inform through the channel that the coin should be sold.

Telegram channels share the information through each other, as the more people are informed of the following pump, the more successfully it is carried out. Pump groups can be open and secret, paid and free. As the organizers buy out the cryptocurrency in advance and inflate its rate, everything depends on the seconds. Paid groups get the data 30 seconds earlier. And by the time the market is entered by free group members ( they may not even suspect that there are paid ones ), paid group members will have dumped the assets, and the release ones can merely hope for another wave. Pump & Dump scheme is huge. To launch a beckon, it is necessity to open hundreds of orders identical fast ; and so, the scheme has transformed into automated trade. Most work for traders is done by bots, like Moon Bot, HaasOnline and others. There is besides special software, car clickers, which create an prototype of large trade volume through multiple orders, worth minimum money, being opened very fast. An car clicker average speed is one snap per 1-5 seconds. To start pumping a coin worth $ 0.001-0.003, one needs 2.5-3 BTC, so even coarse traders can pump such cryptocurrencies. An exercise of such coin is Sport that is at the bottom of TOP-1500 number. Cryptocurrency exchanges don ’ deoxythymidine monophosphate like these strategies and pretend to be fighting that. For case, Bittrex restricted the rules for calculating the percentage change in cryptocurrency quotes and doubled the minimum trade size. But, in fact, Pump & Dump yields them deputation and increases their popularity. And it is not guaranteed that the exchanges themselves don ’ t take part in the schemes. At least, a casual number of pumps doesn ’ deoxythymidine monophosphate reduce ; there is even a fresh modification, ICO pump .

Are Pump and Dump Schemes Illegal?

The question of whether the pump and dump model complies with the jurisprudence is very equivocal for respective reasons :

  • How to prove intentional cahoot of investors ? After all, a fundamental price rush due to investors ’ panic is not a irreverence of the law. Whereas the manipulation itself is .
  • How to identify participants of the cahoot ? It is easy to do on a well-established commute market, but about impossible on the anonymous cryptocurrency market .
  • How and whom to hold accountable? Participants of cryptocurrency pumps are citizens of different countries of the world, it is impossible to hold them accountable. Theoretically, the pump organizers can and should be held accountable. But they should be identified somehow.

Regulators consider “ Pump & Dump ” schemes to be illegal, since the monetary value should be formed entirely by market methods, and any artificial manipulative actions are a deception of investors. But at the same time, regulators admit that they have no clear legislative grounds for suppressing such schemes in cryptocurrencies. The legal condition of cryptocurrencies in some countries has not yet been in full determined. Besides, regulators do not have effective tools that could influence pump participants and stop their occurrence. however, regulators are not giving up. In October-December 2021, the australian ASIC managed to infiltrate one of the largest shut pump channels. But all they could do was to close the impart and warn its participants about possible fines and legal proceedings. so, what is the ending ? The “ Crypto pump and dump ” scheme for cryptocurrencies is more unethical than illegal. If an investor voluntarily invests money on a sharp rise and does not have time to withdraw funds before the collapse, he will not be able to prove the fact of fraud .

How to Avoid Crypto Pump and Dumps?

A firm rise in price is the ambition of many cryptocurrency investors, they believe that new all-time highs will follow the ups in 2017 and 2021. But investing on a acuate rebel puts you under the risk of getting into a “ pump and dump ”, which constantly ends in a scam. How not to fall victim of “ heart and dump ” scheme and what to keep in heed when analyzing the market :

  • Check the listing of the mint on the top cryptocurrency exchanges and the CoinMarketCap websites. On such platforms, startups undergo a scrupulous check and obvious potential scams are not included in the number .
  • Analyze the startup. Ask one childlike question : “ Is there a real reason for the price increase ? ”. If a inauguration is one of the leaders in the segment, price growth on the news is logical. If a inauguration has lone a consonant name and nothing to do with the news, then an increase in its price is a pump. Examples of heart and dump are given above .
  • Analyze the price chart. If the monetary value follows the cosmopolitan market motion, it is not a pump. An abnormal surface in prices, which is not supported by any informational reason, is a reason to be leery .
  • Try to avoid coins worth a divide of a cent. Their price is easier to manipulate .
  • Do not invest in startups that appeared a few months ago. As a rule, serious projects develop for more than one year .

Another trouble of the crypto sphere is “ bogus ” startups. If the pump is carried out by organizers who are not related to the project, they are likely to promote a imposter cryptocurrency. In this case, fraudsters create a land page – a web site without a technological model. They sell tokens in minor portions indeed as not to arouse misgiving. When the price of a cryptocurrency increases, scammers sell their main package of tokens and vanish. A exchangeable boom in cryptocurrency ICO startup has already passed, but deceitful schemes do occur. The faster the monetary value of an altcoin rises, the higher the gamble. If you don ’ metric ton want to take risks, invest in startup from the TOP-200 of CoinMarketCap and industry leaders ( DeFi, DEX, GameFi, and so forth ). You can besides find worthy projects on well-established launchpads, for exercise, .

Can People Make Money from Cryptocurrency Pumps and Dumps?

Yes, you can earn if you meet the stick to conditions :

  • You have access to individual channels that contain first-hand information. Most much, they are paid because pump organizers want to earn money .
  • Your platform/broker/exchange has excellent transfer speeds. ideally, you should use a trading automaton. Your undertaking is to buy cryptocurrency deoxyadenosine monophosphate quickly as potential at the lowest price at the moment you get data on which cryptocurrency is the target of the pump and when it starts. The lapp automaton will allow you to sell an asset at the point of demand from the “ hamsters ”. In the pump scheme, those who enter the cryptocurrency market excessively belated ( at the very vertex ) lose .
  • You are the organizer of the pump.

If the pump has already started, do not try to make money on it. Most likely, you will not have time to earn any more because the asset is sold automatically and about immediately after the monetary value scend. If you are purposefully going to take separate in the pump, remember : the biggest problem for investors is greed. The desire to sell an asset at the highest price turns into a loss of investment when the asset depreciates. therefore, if you decide to participate in such scheme, stick to the follow scheme : Enter promptly at the lowest possible price and sell 50 % of the assets when the price increases by “ 100 % + allowance ”. thus, you return the initial investment and, after going to breakeven, dispose of the remaining 50 % of the asset at your discretion .

Pump and Dump Bots

In an unionize pump, the speed of transactions is crucial. Robots that can open and close many positions in a few seconds, that ’ s why they are normally used in pump and shit schemes. The gross profit pays off due to the avalanche-like price movement. The major advantage of algorithmic trade is the speed of decision reach. however, robots can make mistakes, which is why the degree of risk in cryptocurrency bot deal is even high .

Pump and Dump Cryptocurrencies Yourself

To participate in the cryptocurrency pump, the minimum amount provisioned by the trade conditions ( if any ) is enough. The “ pump ” of capital occurs ascribable to a huge number of transactions and their volumes. And each trader can make his contribution to the crypto mint pump. even though big capital plays the chief character in the heart, private traders can besides take part in it. The chief secret hera is buying at the begin of the pump and promptly selling before the price extremum. That ’ mho why the speed of transaction serve is thus authoritative .

How to save your funds during Pump & Dump

  • don’t invest in already growing trend. The pump yields profits to those, who create it, and to those, who managed to enter it at its first seconds. There is a chance to gain during the second wave, if there is one;
  • don’t base your decisions during Pump and Dump on the forums, the exchange chat;
  • accept in advance that you can lose your money and see Pump & Dump as a gamble (though it won’t protect your money, but it will save the most important- your nerves and peace of mind).


Pump & Dump should be considered as a separate scheme, it does not require cognition of technical and fundamental psychoanalysis. It ’ s not well-defined whether this scheme can be called fraud, but the organizers decidedly win here. Why not become one ? Given the anonymity and lack of legislation, this is not prohibited. The pump object has a stable price, so if the scheme fails, the losses will be only on the gross profit ’ sulfur charge ( the mint is improbable to fall below the initial price point ). All you need to do is find people who are ready to buy. good luck !

Pump and Dump FAQs

What is Pump and Dump? Pump and Dump is a schema performed to artificially increase the measure of an asset for its subsequent sale at the highest possible price. There are two pump options :

  • Pump with big capital. Large investors buy a huge amount of an asset, as a result, its price rises. Private investors start investing in the cryptocurrency, contributing to its further growth. At some point, large investors sell the asset to private investors with a huge profit of 100% or more, the market collapses and those who bought the asset at the peak of the price lose money.
  • Pump by agreement. The organizers plan the pump for a certain time and lure unsuspecting investors by informing them about the coin at the last moment. This insider information is distributed only among members of closed channels. The price increases due to massive investments by a large number of participants. Then organizers sell the coin at the price peak by using robots.

Pump and dump for private investors is a big risk. But at the same time, it is also an opportunity to earn more than 100% in a few hours. Pump and dump for private investors is a big risk. But at the same time, it is besides an opportunity to earn more than 100 % in a few hours .How do you spot pump and dump crypto?

  • Follow social media channels and find relevant information. Sharp and unusual price spikes are often mentioned in sites.
  • Analyze charts. A sharp price spike followed by a collapse on coins worth less than a cent is a pump. Especially if it is based on false information.

You can find a pump after it’s been organized, but what’s the point? As a rule, the same coins are rarely pumped a second time in a short period of time. You can learn about the preliminary pump from closed telegram channels, but participation in such schemes is very risky. You can find a pump after it ‘s been organized, but what ‘s the point ? As a rule, the lapp coins are rarely pumped a second time in a brusque menstruation of time. You can learn about the preliminary pump from closed telegram channels, but engagement in such schemes is very hazardous .Is the cryptocurrency pump and dump scheme illegal? theoretically, any artificial price handling is illegal. For example, in the stock market, the US governor SEC sternly suppresses manipulative actions with the help of spoof and buy up “ junk ” shares. But the cryptocurrency markets are about unregulated – it is difficult to identify and prove the cahoots of investors. therefore, formally, the “ pump and dump ” scheme remains “ unethical ”, but it does not have legal consequences for the investor .Is Bitcoin a pump and dump scheme? No. The capitalization of BTC is more than 40 % of the cryptocurrency market. In order to move the price with the help of manipulations, the joint efforts of all the largest BTC owners are needed. In practice, this is not profitable for them – high volatility will collapse the BTC rate and, accordingly, their capital. The price of BTC is influenced entirely by cardinal factors .Is XRP a pump and dump scheme? It is not because :

  • XRP price basically follows the general market movement.
  • Pump assumes an explosive stock price growth by more than 100% and subsequent rapid sales. XRP did not have such sharp movements, anomalous for the cryptocurrency market.
  • Ripple is a relatively centralized cryptocurrency, its quotes are partially controlled by the developers. They will not allow pumps – this will undermine investor confidence in the entire platform.

Theoretically, pumping XRP is possible, but with so many “junk” coins around, the likelihood of such a case is almost non-existent. theoretically, pumping XRP is possible, but with so many “ debris ” coins around, the likelihood of such a case is about non-existent. The content of this article reflects the generator ’ s opinion and does not necessarily reflect the official place of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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