What is a pump and dump?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 4 min
In short
A pump and dump uses promotion and coordinated buying to push a price up, then sells into the crowd it attracted. The organisers plan the exit from the start, and whoever joins late absorbs the loss. Treat any message urging you to buy right now as part of that machinery.
Key points
- Hype lifts the price, then the organisers sell into it
- The exit is planned before the promotion starts
- The more urgent the message, the worse the entry
- Thinly traded tokens are the easiest to move
Definition
Coordinated buying and promotion that spikes the price of a thinly traded asset, followed by the organisers selling into the demand they created. Most jurisdictions treat this as market manipulation.
In a thin market, modest buying moves the price a lot. Organisers accumulate quietly, then generate simultaneous chatter across social feeds and chat groups. The resulting chart becomes its own advertisement, pulling in people who are reacting to the move rather than to anything about the asset.
Once the price is high enough, the early accumulators sell. There are only so many buyers, so the price retraces fast — usually giving back the rise in far less time than it took to build, leaving later entrants holding the loss.
The useful test is whether the price has an explanation. If nothing has shipped, nothing has been adopted, and all the talk is a prediction plus a deadline, then promotion is the only input driving the move. Paid signal groups and invite links that push you to join quickly belong to the same apparatus.
Watch out for
- · Step away from any source that pairs a price prediction with a deadline
- · Do not buy a spike you cannot explain with something the project actually did
- · Decline invitations to paid signal groups and closed 'call' channels