Have you ever heard of “Pumping and Dumping” of altcoins or cryptocurrencies??
Well, it’s quite common in crypto-industry. In this article, I will be explaining various things related to altcoin pumping and dumping. Along with that, I will also explain why you should STAY AWAY from such Altcoin Pump and Dump Schemes and Groups.
What is Altcoin Pumping and Dumping?
First of all, once again, all cryptocurrencies apart from Bitcoin are called Altcoins.
There are hundreds of coins available in the market, many of them are not even available in big exchanges like Bittrex, Binance, etc.
Since there are 100s of coins, many of them are exploited easily.
So what is altcoin Pump and Dump??
Pumping and Dumping is basically a method by which a group of people starts buying (pumping) an altcoin in large number such that its price increases by a huge margin and later start selling the coin as soon as it reaches a high price. This way the price starts falling back down to where it was (dumping).
Let me put all this in detail!!!
Suppose I want to pump an altcoin ABC which is priced at $0.1. To do that, I will first accumulate a huge number of ABC coins. That means I will buy a HUGE NUMBER OF ABC coins.
Now to pump it, I will spread a fake news about ABC coin in a way that everyone starts buying it. I can spread the news on Facebook, WhatsApp, Telegram Groups and other social media channels.
Usually, there are dedicated pumping groups where the members are told about the coin name and they all start buying together.
That’s called Pumping.
If everyone (members of the group or people to whom the fake news is spread) is buying it and no one is selling it, the prices of ABC coin will start increasing rapidly.
More and more people (even regular traders and newbies) start seeing ABC coin rising and they also start buying it, thinking that it will rise even more.
Now Let’s suppose the price of ABC coin reaches $0.8 in 1 minute.
Since the price is increased, I and other pump group members will start selling the coin to book profits (Because we know that the prices are being pumped and are not naturally increased).
This is called dumping of a coin.
Since the majority hold of that coin was with pump group members, the price will start falling down as soon as the group members start selling it.
After everyone sells their coin, the prices reach back to where it was initially ($0.1). In many cases, the price may even reach under the initial rate.
This way, the group of people who entered when the price was low will make huge profits while those who bought later thinking that the coin was naturally increasing will lose a huge amount of money.
hope you understood the process!!!
That’s basically how this thing works.
Usually, there are various dedicated Pump and Dump groups with 1000s of members who take part in pump and dump. And that’s how it works out. These groups can easily pump a small coin by 1000-1500% within few seconds.
Is Altcoin Pumping and Dumping Illegal?
No, it is not Illegal!! In fact, nothing is illegal in crypto.
But wait !!!
It’s unethical, its fraud, its scam, it’s cheating, its disrespecting and so on!!!
Moreover, there are more chances of losing money in the game of pumping and dumping.
So if you are new to crypto trading, STAY AWAY from Pump and Dump activities.
Once again, I strongly suggest you, stay away from it.
I hope that that the next heading help you understand more.
Altcoin Pumping and Dumping Will Only Lose You Money
Are you thinking that in pump and dump if a coin can get increased by 1000% then you can make huge money?
The answer is BIG NO!!
Let me explain this in points.
The whole process happens within 1-2 minutes that you will not be able to cope up with the speed. By the time your buy order gets fulfilled, others would have already sold it.
The Pump and Dump groups are run by people who PRE-PUMP a coin. It means that, as soon as they announce the coin name, you start buying the coin and they start selling the coin coz they already bought it before.
Pump and Dump usually take place in Exchanges that are not trusted. So putting your money in such exchanges is always a big risk.
During Crypto Pumping and Dumping, the exchanges start lagging, which will not allow you to sell the coin at a faster speed.
There are many more negatives to it.
I hope you understood all the downsides to it.
How to Identify a Pump in a coin?
You can always look for certain things to make sure if a coin is pumped or if a coin is increased naturally.
Here are few points to keep in mind:
If the coin is increased by over 50-60% in a day, then there’s a good chance that it’s pumped by people.
If a coin is increasing every second by huge %, then it may be a pump.
If a coin is suddenly being spread on Telegram channels, Twitter or social media then it might be a pumping scheme.
By seeing the charts you can start noticing pumps.
Moreover, with time, you can easily identify such pumping behaviors by just looking at the charts.
Anyways, that all I have in this article.
So if you are new to crypto, avoid such pump groups and activities. Focus on trading good altcoins and you will start seeing much better returns.