What Is Pump and Dump?
Also known as: Pump & Dump, P&D, Pump-and-Dump
In short
A pump and dump is a market manipulation scheme in which a group artificially inflates the price of an asset, usually one with a low market cap, through coordinated buying and misleading promotion, then sells its holdings at the high price, causing a crash.
In the first stage of the plan, the organizers accumulate the asset before the price rises. Then, through social media, Telegram or Discord groups, and paid promotions, an atmosphere of an 'unmissable opportunity' is created. The growing demand pushes the price up; when new buyers, gripped by FOMO, step in, the organizers start selling. Because liquidity is thin, the sales push the price down quickly, and the last buyers are left with serious losses.
In the cryptocurrency market, these schemes are seen especially with newly listed, low-volume coins and memecoins. Some groups announce in advance which coin will be 'pumped' at a specific time; however, because the organizers generally take positions before the announcement, most participants lose money.
Pump and dump is openly illegal in traditional capital markets, and in cryptocurrency markets it can also be subject to regulatory and judicial sanctions in many countries. Sudden, unjustified price increases, aggressive recommendations from anonymous accounts, low trading volume, and 'buy now' pressure are typical signs of such schemes.
Last updated: · This content is for information purposes only and is not investment advice.