Contents of this article:
Pump and dump cryptocurrency is a way to make money on traders, used by experienced players. In simple terms, this is a manipulation designed for gullible traders. We will tell you what a pump dump is on a cryptocurrency exchange and how to recognize them.
What does cryptocurrency dump mean?
Cryptocurrency dump is a part of the manipulative scheme of earning, it always follows the pump. A pump is a planned artificial increase in the rate of a virtual currency in order to sell it at the highest possible price in the crypto industry. A dump follows immediately after the pump – this is the reset of the crypt when its rate has reached a peak.
Pump and dump cryptocurrencies are typical, as a rule, for little-known assets with low capitalization. Such coins are easier to manipulate, since even small investments in little-known tokens lead to a noticeable price jump. Manipulators, which are called “whales” in the crypto market, draw attention to the coin, artificially creating a stir around it.
Whales force gullible traders to buy crypto, which is why its rate is growing rapidly with the news that the price of the coin will allegedly rise sharply soon, and with other manipulative actions. Whales buy an asset before the price rises, as soon as it reaches a peak, they sell. Soon, the asset rate returns to what it was before the start of the pump. As a result, the organizers of the pump and dump significantly increase their capital, and traders who believe in the prospects of the token lose part of their funds and do not know where to put the “dummy”.
How to recognize pump and dump in time?
Bright signs of a cryptocurrency pump and dump are a rapid increase in the interest of market participants in a little-known asset. What indicates the “bloat” of the course:
- Calm. The plateau period, when the coin rate does not move either up or down, should already alert the trader. As a rule, the course changes after a period of calm and the task of the trader is to predict in which direction it will go.
- The hype around the asset in social networks. A suspiciously large number of reviews, advertisements of the coin, supposedly secret insiders and other hype around a token, especially a little-known one, may indicate an upcoming pump.
- Unpopularity on the stock exchange. If the coin was almost not traded on the exchanges before a significant and rapid increase in the rate, this may mean that the price increase is created artificially.
- Active trades. If the token is actively traded on exchanges from the very first minute of a significant price increase, it is highly likely that after half an hour of trading the coin will sink and its rate will not return to the peak.
Whales play on the emotions of inexperienced market participants, the pump and dump scheme is designed for greed. The trader does not want to miss the chance to earn, seeing how the coin is growing sharply in price, so he is in a hurry to buy an asset for subsequent resale. Whales are well aware of the psychology of traders, and this allows them to increase their capital at times. If you do not want to lose your savings, it is worthwhile to invest and trade cryptocurrency on the stock exchange moderately, not succumbing to emotions, calculating the risks. Spontaneous actions almost always lead to failure.
Is it worth participating in the crypto pump?
Any increase in the rate, natural or artificial, allows you to earn. Pump and dump are organized specifically for making money. However, as a rule, only the organizers manage to earn money. A trader who quickly noticed signs of an artificially created hype around a coin can connect and also earn money if he has time to quickly buy cryptocurrency at a low price.
But it is worth calculating how long the rate will grow, and how much it will grow before getting involved in this game. The one who manages to join literally after the start of the pump manages to earn money immediately and the one who got involved at the peak of the course loses his savings. Pumps and dumps are risky ways to make money, and they are definitely not suitable for beginner traders without experience and knowledge of the market.
Learn to recognize market trends and manipulations on the course from Crypto Crew and in our community. We will teach you how to earn successfully on cryptocurrencies by managing risks, we will tell you more about what a dump on a cryptocurrency exchange is. We train not only beginners, but also experienced traders.