What is a pump and dump?
What is a pump and dump?
Right now the cryptocurrency markets are like the wild-wild-west of the financial world. Largely unregulated, big money moving about quickly, everyone playing fast and hard to cash in while they can. The idea of using blockchain coins as actual currency is still a dream for the majority of people who own them, instead most people think of them as commodities. Buy this coin because other people want it, sell because you feel interest in it waning, very rarely paying too much attention to the underlying technology that makes each alt coin special.
With a majority of people working the day-trade scene and enough of them willing to skirt the laws since there's like zero oversite, a lot of sketchy things are going on. The biggest of them is the pump-and-dump.
Simply put, it's when a whale (someone with a large stake in a coin) begins to hype a coin. They do this on social media, through apps like Telegram, secret groups, etc.. The 'heads up!' to the followers to let them know what's about to rise in price, and rise quickly. These followers buy, and buy, and buy watching the price and profits soar. Then, when the price reaches a certain predetermined point (set by the whale), everything suddenly drops like a rock. The whale sells their stake, then everyone follows suit as the value disappears.
Some people are lucky enough to see the signals and get on board, others, they catch it at the peak and get screwed. Most people are in the second group. The whales pump the stock, then dump it. It's illegal, but why would they care when they probably just made millions, and it's next to impossible to prosecute.
-Damn I'd wish I'd sold at that peak but I HODL-
I wish I could tell you the signals so you would know when to get in to take advantage of what's going on, but I'm still new myself. You can always see in retrospect, the steady bars of green upwards, then a massive spike up, and the inevitable massive spike down shortly thereafter. These pump-and-dumps take advantage of peoples FOMO (fear of missing out) and and newbies lack of HODL (hold on for dear life).
Stay safe out there friends! Trading in cryptocurrency is like war. Keep emotions out, and if something seems to good to be true, it is, and you're too late to the party.
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