What is and how to determine a cryptocurrency pump and dump (Pump and Dump)
The concept of pump and dump has long been familiar to those involved in stock trading or investments.
Pumps and dumps are methods of influencing the price of market assets. Pump means to pump up or speculate on the rise, and dump means to dump or speculate on the fall.
At their core, these two methods are an attempt to artificially influence the price of securities, cryptocurrencies, futures, or other assets.
That is, this influence can be assessed as a method of market manipulation, as a result of which the rate will change in the desired direction.
How does a cryptocurrency pump work?
Betting on price increases in the cryptocurrency market is one of the most profitable activities, as it allows owners of a particular digital currency to earn maximum profits.
A typical cryptocurrency dump situation looks like this.
First, a positive opinion about a particular asset is formed by posting information on news portals, television, and radio:
Topics dedicated to the chosen cryptocurrency are created on social networks and forums.
Politicians are being paid to claim that this altcoin will soon be used in the national economy.
At the same time, buy trades are opened, which show an increase in demand and encourage other investors to buy.
As a result of a cryptocurrency pump, the price can increase tenfold in a short period of time, bringing investors enormous profits.
How to identify a cryptocurrency pump?
This is quite difficult to do unless you're involved in the process and have inside information. The only option is to join a specialized Telegram channel and team up with other traders to try to pump cryptocurrency yourself.
The Cryptocurrency Dump and Its Consequences for Investors
As we know, you can make money on cryptocurrency prices not only by buying but also by opening sell trades on the trading platform. Therefore, many traders prefer to use sell trades to generate profits.
Cryptocurrency trading platforms - https://time-forex.com/kriptovaluty/platformy-dlya-torgovli-kriptovalyutoj
How can you guarantee profits from such trades? You need to know for sure that the price will fall or cause it to fall yourself.
It's much easier to cause a cryptocurrency dump than to increase its value; a loud statement from an influential person or the spread of rumors about the high probability of a price collapse is quite sufficient.
After receiving negative information, investors begin selling their assets en masse, causing a price collapse and the price of cryptocurrencies to rapidly decline.
Is it possible to identify a dump?
Determining the start of a dump is extremely important if you own cryptocurrency, as a drop can result in the loss of almost everything.
Therefore, one should try with all one’s might to notice a negative trend in time.
You can do this by monitoring news about your cryptocurrency and setting stop orders that will be triggered when the price drops to a set level.
