"Pump and dump" - means how dishonest groups pump and abandon cryptocurrencies
Enthusiasts of new altcoins will sooner or later meet with the concept of "pump and dump". There are even whole groups dedicated to this controversial trading technique. Many investors can be tempted by promises of express profits, but remember that the crypto scene does not cease to apply the basic rule: "there is no such thing as a free meal." Even if some traders make great deals on the "pump and dump" technique, most of them lose. Cryptodemy editors do not support this type of play, but it is worth getting acquainted with the functioning of the "inflate and abandon" method - if only to avoid it.
The Pump and Dump technique is a manipulation of exchange rates with low sales volumes. There are a lot of payment methods available for this method on the young altcoin scene. Although most people have the impression that courses behave in a random and unpredictable way, and at best are derived from the mechanisms of crowd psychology, in fact many phenomena on the stock exchanges bear the hallmarks of planned manipulations. On the old stock exchanges we have had such a phenomenon for a long time, but young markets - such as the cryptocurrency market - are particularly susceptible to this type of tampering with the exchange rates.
There are many junk "shitcoins" that almost nobody has heard of, but you can still trade them. At the altcoin there was now a fashion and their volumes were so thick that their heads were raised by predatory investors - both organized gangs and lone wolves. They attack suddenly, the traces of their activities mean bleeding stumps of courses. Manipulation is ubiquitous, especially on a cryptocurrency scene that is full of easy victims.
To put it simply, the "Pump and Dump" method is an organized market manipulation of finding a forgotten altcoin and inflating its course. Cwani investors are also starting to sell irrelevant or fictitious messages to justify sudden increases in the inconvenient currency. The main architect of the plan buys a large amount of coins in advance, and then, together with the initiated group, start to pump the course. When the currency is already stimulated enough to make it visible, signals are sent to free advisory groups and forums. The game is coming. When new investors start to buy new products, the creators of the intrigue have already prepared their sales orders. After getting rid of the inflated altcoins, the gang gets lost with profits. Investors stay on the ice with digital wallets full of worthless assets.
How pumping is organized
The plan is simple: at first there are several admins of large groups offering "free trade signals" (especially the encrypted Telegram seems to favor these types of phenomena). Then, such groups try to consolidate - this increases the pool of potential victims and facilitates coordination. Then you need to find the bait - the right shitcoin. Usually, several promising coins are compared, usually one that is not listed in the first 75th of the CMC ranking is usually selected, and for a long time it loses value. Pumping people organize several paid groups that will be used to revive the course. These groups have different buy-in - the higher, the earlier its members will get a signal to buy junk assets, and therefore cheaper they will be able to acquire them. Later on, those who have paid less will be admitted to the table - they will still be able to buy the pumped currency during the accumulation phase, but at higher prices. The course begins to lift.
An important part of the plan is buying in small portions - usually for not more than 0.2 BTC, so that someone who wants to follow the history of the course, did not get to know what is going on here. Meanwhile, on free groups, bots start to post pre-prepared "signals" like "in fifteen minutes we will give the next signal to Pump & Hodl". Five minutes before the signal, they will often use the glitzy phrase "Recharge your Bittrexy". Meanwhile, the authors of the intrigue and their helpers from paid groups have already collected quite a lot of altcoins and are just waiting for feeding. And when they finally invite a free-form cook from the free group for dinner, he will be the main dish.
Now comes the time for collaborating admins of free groups. They get a signal - and a chance to buy a lot of coins. When the message finally reaches ordinary users, an eye-catching green candle appears - an artificially fattened trading volume and an upward trend. All users of free groups (sometimes there are really a lot of them) get a signal at the same time - and start buying as they go crazy. The price is growing rapidly. The authors of the plan have predicted and agreed on a specific threshold - usually around 20-30% - after which they will get rid of their assets and leave the group.
Congratulations, you have just been exposed.
Pumping step by step
Pumping usually takes place according to the same scheme. Preparations take some time, and pumping usually follow a strictly defined sequence. Their "business plan" looks like this:
Phase 1: Accumulation
In the accumulation phase pumping build their position. They care about discretion, so they can not afford rapid movements of the course that betray their intentions. So they open hundreds of tiny, penny buy orders and do it slowly, gradually building their position. If the trading volume is very low, some hills in the chart are unavoidable, otherwise stockpiling would take too long. On the other hand - early jumps of such currencies also create an opportunity to shake coverts out of unsuspecting holders of small amounts of manipulated currency - they will usually get rid of their shitcoins with relief. Then the pumpers will reach for "false walls" - different methods of stopping the course against too fast growth in the initial phase of intrigue. A typical feature of this repertoire is, for example, issuing a huge, impossible to implement sales order - thanks to which the order history looks like the price was about to collapse at any moment. This should be enough to scare off third-party investors and give the pumping operator the opportunity to continue collecting shitcoins.
Phase 2: Trial pumping
Before real pumping occurs, we usually have to deal with a few trials. They are being carried out to test the market, because the pumping want to be sure that they are controlling the situation. In this way, they examine the potential resistance and general mood of investors. Trial pumping and subsequent trial underselling also allow the shark investors to shake the coiny from the market. Such reed animals are ready to sell themselves at the first sign of change of course - so it will be good to get rid of the pumping pump in advance, while earning a few extra coins at low prices.
Phase 3: Last purges and a big pump
When the time comes to finally suck up assets from uncertain investors, pumping often starts to become aggressive. Below we have a great example - the price has been inflated from the low to a record height in just one move. Crazy, huh? And this is just another example of the fact that trading in cryptocurrencies is not for the timid. Let's see what really happened here:
Pumping people are not afraid of the maximum price breakdown. They are sure of the strength they give them control over trader groups, and they have enough resources to revive the price when the time comes. So they do not care about low prices. However, ordinary, unaware traders intrigue. They will get scared and start to sell everything they have in panic. Even with the most liberal stop-loss setting. Now imagine that you are getting a signal to buy, when the candle is very long, your order can not be filled and you buy what you can in panic. You just fell into a trap.
Phase 4 and last: take money and legs
Pumping people use several different strategies to volatilize with profits. It is worth remembering that the cunning authors of the plan will be earning just those who, thinking that they are late for the party, will be willing to buy anything. Such, after all, got guidelines from set groups with signals. Meanwhile, pumping or placing dozens of small sales orders, or one large - it depends on them. They also have much more advanced techniques at their disposal, such as buying their own walls over and over again in order to evoke fear of missing the opportunity. In such a variant, as soon as the victims of the number begin to buy willingly, the pumping will start to step back a step.
Conclusions
The pump and dump method is dangerous for all those who do not belong to the inner circle of the insiders into the plan - that is for most investors. There are groups offering early access to the scam - usually for a luxury fee. Many others are free only seemingly - in fact, those joining it are to become game for pumping in the future. Particular attention should be paid to the networks of groups recommending each other.
In a confrontation with groups of manipulators using the pump and dump method you stand on a lost position, you are just a small fish in a tank with sharks. The internet is full of fantastic free things ... which are not free at all. Facebook and Google you pay with your data and your privacy - about it, we hope you know well. Groups that offer free "infallible signals" will probably pay a living cash. The bill will come late - but it will come. Together with other investors and dozens of useless coins, you will be abandoned, and sharks will go in search of new fisheries.
Good advice for novice traders will be - if you do not know with certainty what you are doing, stay away from suspicious shitcoins with a low volume of trading, especially if several groups suddenly start to recommend them in a coordinated manner. It is better to invest in something more reliable and not panic during inheritance.