What is pump and dump cryptocurrency

Cryptocurrency trading is an unpredictable environment where only a trader who is well versed in the intricacies of working with digital currency can make money. Jumps in the exchange rate for currencies are often sharp, but for knowledgeable traders, this is a chance to make good money. 

Content

What is pump and dump cryptocurrency

How pumps and dumps work

Types of pumps

Signs of pumpas

How to pump cryptocurrency

How to predict cryptocurrency pumps

How to make money on pumps

How not to lose on pumps findings

What is pump and dump cryptocurrency

Cryptocurrency exchanges are an environment that is not controlled by most legal laws. Many factors influence the value of tokens, and the decentralization of the market further contributes to market scenarios. So the price of a cryptocurrency can change by tens of percent during even a day of trading. Large players also help this, using various manipulations to artificially inflate the cost of the token. It is impossible to eradicate such jumps, but it is quite possible to make money on them. First, let's get acquainted with the terminology.

Pump (from the English “pump” - to inflate) is the process of artificially inflating the value of a cryptocurrency by buying it in bulk. Dump (from the English “dump” - reset) is an obligatory part of the pump, which follows after the cost of tokens has increased. Investors who have bought a currency at a low cost are selling it at an inflated price on the pump.

Pump and dump

Pump and dump are inseparable sequential actions. Usually, pumps arise by prior agreement of large traders. The largest number of them is recorded on large cryptocurrency exchanges. The phenomenon itself migrated from the stock market.

Large traders who organize pumps are called whales, and ordinary traders who naively buy cryptocurrency at an inflated price have received the condescending nickname "hamsters". Pump, dump and hamsters are concepts that are combined into a concept for extorting money from gullible users. In the specific trading lexicon, this process is referred to as "hamster shearing".

Pump and dump

How pumps and dumps work

Pumps are designed for beginners in trading who are poorly familiar with its environment. The organizers of the pump prepare the target audience in advance, notifying that the tokens of a particular cryptocurrency will increase significantly in price. At the same time, the organizers have already bought up a huge amount of tokens at a low price, and the provided insider information is only part of a cunning plan. Against the background of the hype, there is an increase in the cost of tokens, and the organizers drain their savings to gullible traders at an inflated cost. After that, the rate of the cryptocurrency returns to its original positions.

To attract the audience, various means of informing are used: blogs, social networks, news feeds, instant messengers, chats of cryptocurrency exchanges.

The profitability of pumps depends on participation:

• organizers increase the invested capital by 20-30%;
• traders who have caught the moment when a pump occurs can increase their capital by about 5%;
• hamsters who bought tokens at an inflated price go into negative territory by 20-30%.

Types of pumps

Separate long-term and short-term pumping of cryptocurrencies.

A short-term pump takes place in a few minutes and is used mainly for young, but already well-known cryptocurrencies. This is due to the low cost of such tokens and the belief of novice traders that its value can naturally grow at any time. So, whales are buying up a huge number of coins at a low cost at the same time, from which the rate is skyrocketing, and novice traders on the wave of growth tend to buy as many tokens of a growing cryptocurrency as possible. From that moment on, the pump turns into a dump - and the whales sell their coins at an inflated price.

On the chart, short-term pumps are reflected by a rapid rise in value, holding positions at the top of the value for several seconds, and the same sharp rapid fall. For such a pampas, relatively small financial costs of the organizers are required. Usually, the exchange rate of an unstrengthened currency can be inflated for 50-60 BTC.

Short term pump

A long-term pamp is prepared for several days. For such pumps, currencies from the top twenty of the rating are selected. Through the dissemination of information, forecasts are transmitted that this currency will rise in price in the coming days, plausible and not very arguments about changes in the company can be given as arguments. A long-term pump can last several days, while ups and downs can be observed in several stages, and the organizers, accordingly, manage to increase their assets several times. To organize a pump for top cryptocurrencies, significant financial assets of the organizers are required.

Long term pump

Signs of pumpas

All pumps have common features:

A sharp increase in quotes.

Significant increase in trading volume.

Mismatch between news and official project data.

Artificial inflating the hype with insider information.

price increase chart and coins by 40% in 10 seconds

Pumps are displayed on quote charts as an unnatural increase in trading volume. Short-term pumps are characterized by a sharp rise in quotes and trading volumes in a matter of seconds. It is almost impossible to track long-term pumps on quote charts, since they are not much different from natural ones.

Experienced traders know how to determine the cryptocurrency pump by trading volume. If it unreasonably became too high, then this is the first sign of the upcoming pump. In this case, you should pay attention to both trading volumes and information from the news. If there is information about the possible growth of the cryptocurrency for some reason, while the reason does not correspond and is not confirmed by an official source, then, most likely, a long-term pump is being prepared for this cryptocurrency. An unnatural increase in trading volume in a short period will tell you on which platform it will take place.

How to pump cryptocurrency

Organizers make money on pampas, mainly. Despite the fact that this is not a completely honest method of earning, it is able to increase invested assets by 30% in a matter of hours.

To organize a pump, you should prepare investment capital that can build upward trends, or gather a group of like-minded people who will inject assets at the same time.

The organization of the pampas begins with prepared information. On thematic forums, in groups, false or exaggerated information about the upcoming growth of cryptocurrency is posted. Next, the organizer or by agreement of a group of traders chooses the time and place of the pump. For convenient and efficient organization of simultaneous buying, you should place a link to the site.

At the specified time, pumpers start actively buying tokens on the site with an increase in their value and the subsequent placement of sell orders. When the volume of trading and the cost of the coin reaches the peak, according to the organizers, marks, the operation is transferred to a dump.

How to predict cryptocurrency pumps

You can learn about pampas from the means of informing about them. To do this, you should subscribe to the blogs of major traders, join the relevant groups on social networks and carefully follow the news feed. Some organizers are not shy about saying not only that a pseudo-growth of the rate is expected, but they can also say honestly that a pump will be organized at a specific site at the appointed time. This method helps to stimulate active buying. As a rule, by this moment the organizer already has prepared orders and he will still receive preferential profit even from traders who are informed about the pump.

There are paid and free sources of information. They are not much different, except that paid insider information suggests double earnings for pampers.

How to make money on pumps

The main income from the pampas is received by the whales that organized it, and there is no effective mechanism to prevent this. The rest of the traders have no choice but to "foresee" the cryptocurrency pump and try to make money on it. Traders who are able to catch the moment when a pump occurs can earn from 5% to 10% by becoming assistant organizers. To do this, in advance or in the first minutes of the pump, you should purchase the selected cryptocurrency and be in time, at the same time as the organizers, to merge it during the dump.

Investing in cryptocurrency pumps is a risky type of income. Do not invest more than 5% of your investment capital. There is a possibility that an investor who was counting on instant profits may become a long-term investor in cryptocurrency, waiting for the next pump or natural growth. A less risky option: when receiving information about an upcoming pump, place several orders for the sale of tokens in advance, taking into account the growth in their value by 3-8%. If the pump does not take place, then the orders are simply closed, if it does, then, most likely, with the pump, the value of the currency in the order will be more profitable than the rate and sold out by traders.

How not to lose on pumps

Only a trader who knows what a cryptocurrency pump is, can determine it in a timely manner, and makes transactions based on this knowledge can not lose on a pump. If you find a rapid growth in quotes, you should not immediately buy cryptocurrency. If this is a natural growth, then it will be supported by a real increase in the popularity and reliability of tokens, and, accordingly, have a long-term perspective for growth. A purchase in such cases will be no less profitable even a few hours later, and in the case of a pump, such a price is already too high.

When participating in the pump, you should not wait for maximum growth. For accomplices, the best solution would be to start the drain shortly before the organizer, since after the first dump, their token rate will drop significantly, and the rest of the fluctuations will be insignificant and organized by traders who mistakenly stingy. You should not be afraid to sell your tokens immediately after the price starts to decrease

In the future, the prospect of their storage may be even more unprofitable.

Short-term pumps are more risky, so if you are just entering this road, you should give preference to long-term pumps of top cryptocurrencies. In this case, even with unsuccessful participation, natural growth can be expected, and a high probability that another pump will take place in the near future will also reduce the risks.

In the stock markets, pumps are equated with fraudulent activities and do not occur as often. But the cryptocurrency pump on Yobit occurs almost every hour, and the number of gullible traders is hardly reduced from this.

In order to
be able to make money on the pump, you should become its organizer or
accomplice, and for this you absolutely need to be aware of the events and have
access to information about them. It will not be superfluous for traders who do
not want to fall for the bait of pampers.