Every day, we read posts everywhere that go something like this:

"I noticed it was already about 200% but blinded by greed I just decided to click on the coin name, everything was happening so fast. Prices kept changing every millisecond and I placed an order at the last asking price and picked up 250 units of the coin before I knew it the prices came crashing down. All happened within two minutes, I lost half a bitcoin"

This is the work of a pump and dump group. Pump & dump groups are made up of people seeking fast profits on the cryptocurrency market by deceiving others.

WHAT IS A PUMP AND DUMP?

Pump and Dump is a deception organized in Slack, Telegram or Discord groups by a few "Players". These players normally coordinate more than one group and they are the only ones who can address the channels, without the option to chat for other people (which prevents any complaining about huge losses from happening).

Some of these groups are composed of more than 50k people. Suppose only half of these people invest 500$ in the coin that a pump and dump group advertises it corresponds $12.5 Million. So yes it can affect the market, and yes it happens every day, multiple times per day.

How do Pump and Dumps work:

Organizing the group

• Players attract other people to a group on slack/telegram/discord where they promise 100-200% gains per trade if you act accordingly to what you are told.
• Players also try to pay them for access to a VIP paid group, which costs normally between 700-1400$, to get the chance to received player's "signals" beforehand. (I swear the admins have their birthdays at least 3 times per week!!)

The Strategy

• Players decide together which Altcoin is ready for a pump and dump (normally unknown alts since they can't affect the price of a coin with tens of millions in trade volume).
• Players buy that alt at a low price (sometimes increasing it already by 100%)
  When everything is ready, the group members are informed to log in to the exchange and have their bitcoin ready. Normally this is done on Bittrex or Binance.

Pumping

• It's pumping time! The Players inform all their groups that they should buy X coin under a specific price and are given targets to which they should sell small portions of their investment. A stop-loss is also given in case anything goes wrong. (spoiler alert: it will)
• Group members start to buy X coin and the price starts to increase very fast.

Dumping

• When the price reaches a certain point (this can take less than one minute) the Players sell their big bags of X coin to the group members who are still buying causing the price to drop.
• As soon as the group members see the price drop, the panic starts and everyone tries to lower their sell orders to try to make some profit.
• At the end of the Pump and Dump, the Players increased their balance by 100/200%, some group members made 5-20%, but most sold at a loss, losing all of their investment.

Conclusion

In such an unregulated market, these players are making a huge amount of money at the expenses of new investors. It is possible to be one of those 5-20% group members, but the probability of always getting the selling point correct is very low.

Unless you know what you are doing, or have a huge amount of money that you are comfortable losing, STAY AWAY from this groups.

Take into consideration that this does not represent financial advise. Do your own research before investing.

Thank you for reading and do not forget to support the blockchain revolution!

Crypto Billionaire

This post was written to be part of the blog of CryptoBillionaire - The Original Crypto Shirts