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What is PUMP & DUMP?
This material is published exclusively for educational purposes and is not a call to participate in investment schemes or instructions for their organization.
What is PUMP & DUMP?
PUMP and DUMP – a manipulative scheme for increasing the cryptocurrency rate with subsequent price collapse. Large owners of assets artificially increase (“pump”, PUMP) their value in order to subsequently sell (“reset”, dump) as expensive small traders as possible. As a result, the value of the asset is reduced, and investors lose their means.
PUMP scheme & DUMP arose in the securities market long before cryptocurrency. The first documented episode of such fraud was the scam of the British trading company of the southern seas, which at the beginning of the 18th century overstated the course of shares by untruthful promises of profit. This led to the emergence of the so -called bubble of the South Sea.
Subsequently, PUMP & DUMP was widely used in the American market of “garbage” or “penny” shares (cheap securities with low market capitalization) during the great depression in the late 20s and early 30s. XX century. Then brokers sold cheap promotions to each other, which led to an increase in demand and rise in prices, after which the shares were thrown into a public market. In the United States, such a practice was recognized as illegal. The flowering of PUMP circuits & DUMP in the stock market fell on the beginning of the 2000s.
In almost unchanged form PUMP & DUMP migrated to the cryptocurrency market. This was facilitated by the lack of regulation. There are currently about two thousand “garbage” cryptocurrencies. Messengers and social networks have a huge audience, so PUMP scheme & DUMP is extremely popular in crypto.
During the existence of cryptocurrencies, tens of thousands of pumps took place. According to experts from the Imperial College of London, at least two fraudulent schemes of this kind are implemented every day, and the monthly profit of the organizers is an average of $ 7 million.
How PUMP works & DUMP?
Having chosen the exchange and coin, the organizers buy tokens in small portions so as not to provoke a premature growth of the course. As a rule, these are little -known cryptocurrencies with low capitalization, in the common people known as shitcoin. Sometimes for PUMP & DUMP and relatively large cryptocurrencies are also used.
After buying the token, PUMP begins – its “pumping”. In messengers, news feeds, social networks and exchange chats, a fast growth of the course is announced and the name of the exchange platform is reported, where the organizers of the scam through their bots place and take large orders for the purchase of token, raising its quotation. This is the first wave of pampa.
Most large bitcoin-uses limit such activities, and coins in their listing are rarely suitable for the scheme. But there are popular sites that support more than two hundred coins – they attract scammers in the first place.
For heating buyers, false information on partnerships, investments or technological updates are used. Paid “experts” are connected to a misinformation campaign. “Sensational” information is distributed mainly through Telegram channels. At the same time, most of these channels directly report on the pampa, promising a profit.
After that, investors are sure: since they know about the pampa in advance, they will be able to earn money. In fact, they are already victims, and some of them even pay for subscriptions to such pump channels.
In the case of a successful advertising campaign, the second wave of pampa begins – third -party investors come, which independently affect the growth of the course. Against the backdrop of excitement, the price is growing, the organizers sell tokens at high cost, after which the cryptocurrency rate is returned to the initial indicators.
What are the types of PUMP & DUMP?
Cryptocurrencies are divided into long -term and short -term.
- The short -term pump lasts several hours or even minutes and is used in the case of little -known cryptocurrencies with low capitalization. During the Pampa, their cost swifts rapidly, holds positions for several seconds, after which it falls equally quickly. The financial costs of the organizers of such a pump is relatively small – the “pumping” of the course costs an average of 50 – 60 VTS.
- For a long -term pamp, cryptocurrencies from the first twenty are selected. As a rule, it lasts several days, and the ups and downs of the course occur in several stages. The organization of a pampuver of large cryptocurrencies requires significant financial costs, so large players or communities of traders are engaged in this.
What are the distinguishing features of PUMP & DUMP?
- Revitalization of exchange activity (the emergence of large orders for the purchase and sale) and growth of the course in the absence of positive news;
- Lack of similar price growth on other exchanges where cryptocurrency is traded;
- Active advertising campaign of cryptocurrencies in exchange chats, forums, social networks and/or in Telegram channels.
Is it possible to earn on the PUMP diagram & DUMP?
It is almost unrealistic to earn on short -term pampa: profit is possible only for the organizers, ordinary traders simply do not have time to react. Accordingly, it makes no sense to subscribe to the pump channels in Telegram with an audience of several thousand people.
It is theoretically real to earn on long -term pampa: the trader can count on profit, however, in this case, he has a matter of minutes to put up the order. Moreover, the probability of losses is equal to the probability of profit.
Most Pamples have one predictable feature: after the first collapse, a new short -term growth occurs due to the fact that retail investors are included in trade. After the trader is in a loss to sell tokens during the collapse, he can buy them at a minimum and sell them during the second rise.
It is impossible to buy coins during the second rise – this is a guaranteed loss. Secondary price peaks are characteristic only for sufficiently large coins with a capitalization of at least a million dollars.
Examples of PUMP & DUMP
On the night of November 5, 2019, the price of Parallelcoin token in a matter of hours increased thousands of times (from $ 1.60 to more than $ 2200), which gave users the opportunity to talk about the appearance of a “new bitcoin”. A few hours later, the price returned to the level of $ 2.
Ladies & Gentlemen.. we have the new bitcoin 😂
But, seriously. Does Anybody Know What Parallelcoin is?$ Duo pic.Twitter.COM/AX1WA41HW
– Crypto Godfather 教父 (@cryptogodfatha) november 5, 2019
The increase in the price of Link token was preceded on Twitter about cooperation: on June 13, 2019, ChainLink announced partnership with Google Cloud, which confirmed this information. After that, the price of Link token increased from $ 1.19 to $ 1.93.
On June 26, Chainlink reported that the token included in Coinbase, after the price of token increased to $ 2.24. On June 28, the pump began: several addresses bought large quantities of Link on Binance, after which they transferred them through a number of dummies. By June 29, the price of Link increased to $ 4.45. According to observers, the daily trading volumes of Chainlink on the Binance exchange at the end of June were artificially screwed up. So, under capitalization of only $ 1.4 billion, this figure amounted to $ 863 million. The schedule of price movement for the mentioned period, according to some, looked unnatural, especially considering that volumes were recorded on one of the green candles in favor of sales. There was a chance that unknown people wanted to provoke Fomo, but could not achieve the goal.
On July 2, the dump phase began: the addresses that had previously bought tokens began to be discarded, having previously passed them through the chain of dummy addresses. Only one of the addresses from July 2 to 15 sold 4.2 million Link tokens. On the first day, Dumpa, July 2, the cost of token dropped to $ 3.73.
On July 6, a message about the recruitment of personnel, which, according to some observers, testified to the dumpling was published on the Twitter page of the project. Following this message on social networks, a schedule was distributed, on which the estimated sales of tokens of 700,000 Link at each rebound of the price after reaching the peak at the end of June were displayed. Passing through a small chain of addresses, these tokens were sold on Binance. Some believed that the message about expanding the state was only an attempt to hide the large -scale elimination of tokens.
By July 15, Link was already $ 2.79, after which the collapse continued. As of September 16, Link cost $ 1.61: the price almost returned to the level of mid -June.
February 6, 2018 in a few hours the price of a little-known E-Coin (ECN) token increased from $ 6 to $ 290 by 4700%. Cryptocurrency capitalization reached $ 1.5 billion. Token entered the top 20 on Coinmarketcap. After that, during the day the price fell six times – up to $ 45.
Then there was a new ECN growth round to $ 228 (400%). The subsequent dump reduced the cost to $ 5. Further per day, the price increased again from $ 5 to $ 65 (1200%). At the time of these events, the project did not even have a working site.