Don’t Get Caught!
Pump and Dump is a common term used in crypto. This refers to someone or something causing a surge in the price of a coin. It has been has been very popular in the cryptocurrency space.
In these Pump & Dumps people buy a specific coin at a time to “PUMP” its value. The soar in value is known as the ‘pump,’ while the mass selling is known as the dump. There are even groups dedicated to this.
How do these groups work?
The whole mechanism of Pump & Dump works in layers. This include Organizers, Paid Inner Circle, Inner Circle, Paid Outer Rim, Outer Rim and Final Participants.
The organizers make a decision on what coin to pump. The main members are the organizers and inner circle. They decide and obvioulsy get info first. The info is then passed down the chain in stages. This can be extremely dangerous unless you are the one running the scheme and in the inner circle.
These schemes focus on low volume coins as it is easier to move the market.
Once the coin is chosen organizers buy. They get a head start and will profit the most. They do need to be careful so they do not pre-pump. The word is put out down the chain very quickly creating the pump which is the RISE! Once the coin starts to move the prep for the dump prepares.
Organizers who bought coins in advance now sell or dump their coins while the others are still buying. The quick sale brings the coin back to its initial value or lower resulting in heavy losses for those who purchased the token at the later stage of the pump.
Another type is the celebrity pump. The most notorious guy known for this is most notable is John Mcafee. He uses his celebrity status to get people that are uneducated to buy and then works them over by selling after recommending something to take profit.
So how does this happen? Organizers select a coin, the celebrity is paid his or her fees to pump the given coin. For instance, McAfee pumped several coins using his influence while the alleged organizers dumped with the spike.
The Pump & Dump is a very risky scheme . We frown upon it as it screws all of us trying to invest. The lack of regulation in the cryptocurrency market gives rise to such practices. It is best to research coins that will last over the long term and their purpose before investing in them.
By learning technical analysis, you have a better chance of investing safely.