A pump and dump scheme is a manipulative market practice where perpetrators inflate an asset’s price through hype, then sell off their holdings at the peak, causing the price to crash.

Pump and Dump Meaning

A pump and dump is a deceptive strategy that artificially inflates the price of an asset through misleading positive statements, followed by a swift sell-off by the perpetrators, leaving honest investors at a loss.

Understanding Pump and Dump in Cryptocurrency

You may liken a pump and dump in the crypto realm to a scenario where a group of traders or large holders (whales) focus on a lesser-known cryptocurrency. They inflate its demand and price through aggressive promotion and then sell their holdings at the peak of the inflated market. This results in a sharp price decline, harming the investors who were convinced to join the frenzy.

Recognizing Pump and Dump Schemes

Identifying a pump and dump scheme can be challenging, but there are signs you can look for:

Always exercise caution and conduct thorough research before investing in any cryptocurrency. Remember, if it seems too good to be true, it likely is.