PUMP AND DUMP: HOW DOES IT WORK?

Pump and dump schemes are everyday in the world of cryptocurrencies. Different groups artificially increase the value of cryptocurrencies (pump), then abandon it (dump) with a profit. Such communities most often function within such messengers as Telegram and Discord. They usually choose small, unpopular cryptocurrencies for their "victims". Often these are so-called "shitcoins" - projects that have no value or future.

The BitFalls portal presented a detailed analysis of the functioning of these communities. They are usually secondary groups subordinate to other communities. As a result, the younger group is used to make profits.

Where is the division from? The way of providing information is important. The community structure is not uniform. It is usually divided into internal and external groups. Even in an internal environment, there is a diversified flow of information, often depending on the input fee. People from the "core" of the group receive the signal first, only a few seconds later the rest of the group receives it. Then comes the phase of gigantic buying.

The problem is that the further away you are from the decision-making core, the lower the chances of getting a satisfactory return on investment. The following graphic shows an example of community segmentation in such groups.

A few weeks ago, John McAfee was accused of deliberately pumping cryptocurrency prices. According to this theory, McAfee would have to pay 25 BTC for promoting the projects - in the light of his "Altcoin of the day" cycle, it seems quite reasonable.