What is and how to determine a cryptocurrency pump and dump (Pump and Dump)
The concept of pump and give has long been familiar to those involved in stock trading or investing.
Pump and dump are methods of influencing the price of market assets. Pump - pump up or play for an increase, Dump - dump or play for a decrease in the exchange rate.
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 way of manipulating the market, as a result of which the exchange rate changes in the desired direction.
How does a cryptocurrency pump happen?
Playing to increase prices in the cryptocurrency market is one of the most profitable activities, as it allows owners of a particular digital currency to earn the maximum.
A typical cryptocurrency dump situation looks like this.
First, a positive opinion is formed about a particular asset by posting information on news portals, television, radio:
Topics dedicated to the selected cryptocurrency are created on social networks and forums.
Politicians' statements that in the near future this altcoin will be used in the state economy are paid for.
At the same time, transactions are opened for purchase, which show an increase in demand and encourage other investors to buy.
As a result of a cryptocurrency pump, the price, in a short time, can increase tenfold and bring investors simply huge profits.
How to determine a cryptocurrency pump?
This is quite difficult to do if you yourself are not involved in the process and do not have insider information. The only option is to become a member of a specialized telegram channel and team up with other traders to try to pump up cryptocurrency on your own.
Cryptocurrency dump and its consequences for investors
As you know, you can make money on the cryptocurrency exchange rate not only by purchasing, but also by opening sell transactions in the trading platform. Therefore, many traders prefer to use sell trades to make a profit.
Platforms for trading cryptocurrency - https://time-forex.com/kriptovaluty/platformy-dlya-torgovli-kriptovalyutoj
How can you be guaranteed to make money on such deals? You need to know for sure that the price will fall or cause it to fall yourself.
It is much easier to dump a cryptocurrency than to raise its value; a loud statement from an influential person or rumors about a high probability of a price collapse is quite enough.
Having received negative information, investors begin to sell their assets en masse, causing prices to collapse and the cryptocurrency to rapidly become cheaper.
Is it possible to detect a dump?
Determining the beginning of a dump is extremely important if you own a cryptocurrency, because as a result of a fall you can lose almost everything.
Therefore, you should try your best to notice a negative trend in time.
This can be done by monitoring the emergence of news on your cryptocurrency and by setting stop orders that will be triggered when the price falls to a set level.