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Author: Admin | 2025-04-27
What is a Pump and Dump in crypto?A pump and dump is a market manipulation scheme where the price of a cryptocurrency is artificially inflated. Promoters use hype, false news, and coordinated buying to push the price higher. Once enough retail investors buy in, the manipulators sell off their holdings, crashing the price. Those who joined late are left with heavy losses.Pump and dump schemes have existed for decades in traditional finance. The rise of crypto has made them easier to execute. With decentralized exchanges and anonymous transactions, scammers can operate without oversight.How Do Pump and Dump Schemes Work?Pump and dump schemes follow a predictable pattern:Selection of a Target Coin – Scammers pick a low-volume token, making it easier to manipulate.Organized Hype – They use Telegram, Discord, and social media to spread excitement. Some even create fake news.Artificial Pump – Coordinated buys push the price up quickly. Bots and influencers fuel the rally.Retail Investors Join – As FOMO (fear of missing out) kicks in, everyday investors jump in.Dump Phase – Early organizers sell at the top, crashing the price.Retail Investors Lose – Those who bought late are left holding worthless tokens.Src: BMCWhy Do People Fall for Pump and Dumps?Greed and the promise of quick profits drive people into these schemes. The idea of turning $100 into $10,000 overnight is irresistible. Many traders believe they can exit before the crash. But most fail.Crypto also lacks regulation. Unlike stocks, where pump and dumps are illegal, crypto has no consistent global rules. Scammers exploit this legal gray area.Another key reason is misinformation. Social media amplifies hype, and many investors fail to do proper research. The illusion of legitimacy makes these schemes even more dangerous.New traders are especially vulnerable. They see rapid gains and assume it’s a genuine opportunity. By the time they realize the truth, it’s too late.Celebrity Pump and DumpsFamous personalities play a significant role in market manipulation. They promote coins to millions of followers, often without disclosing financial ties.In 2022, Kim Kardashian settled with the SEC for promoting EthereumMax without revealing she was paid. Floyd Mayweather and DJ Khaled faced similar charges. Their endorsements misled investors into thinking the projects were legitimate.Elon Musk has also influenced crypto markets. His tweets about Dogecoin sent the price soaring. Though not a traditional pump and dump, his influence highlights how celebrities can manipulate prices.Some influencers knowingly take part in these schemes. Others get paid
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