How Pump and Dump Schemes Effects Crypto Market

Pump-and-dump schemes affect the crypto market adversely by artificially inflating the prices in an irrationally high way, with a subsequent abrupt collapse. In a regular pump-and-dump scheme, some group of insiders or malicious actors inflates the price of some cryptocurrency so-called "pump"-by hype, misinformation, or buying massive amounts of the token. This attracts unsuspecting investors, driven by a so-called FOMO mentality, into buying the asset at inflated prices.

At the height of the price, the insiders immediately dump all their holdings, and the price comes crashing down. Because of this, late investors are left holding devalued tokens, often suffering a serious financial blow. Mostly, pump-and-dump schemes make a profit for a very small group of orchestrators, while to the wider community of retail investors, they bring harm.

These schemes defame the reputation of the entire cryptocurrency market. They tend to cause volatility, crush any potential trust, and deter potential legitimate investors. What's worse, with the existence of pump and dump activities, increased regulatory attention often arises, having consequences of a heavier regulation status that may stifle innovation in the space.

In a nutshell, these schemes of pump and dump damage the crypto market integrity, destroy investors and bring chaos capable of influencing the long-term growth and adoption of cryptocurrencies.

Thanks

src

~ Nesaty