{"id":37282,"date":"2020-02-27T13:54:03","date_gmt":"2020-02-27T11:54:03","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=37282"},"modified":"2025-08-29T14:51:38","modified_gmt":"2025-08-29T11:51:38","slug":"what-is-pump-and-dump","status":"publish","type":"post","link":"https:\/\/forklog.com\/en\/what-is-pump-and-dump\/","title":{"rendered":"What is pump-and-dump?"},"content":{"rendered":"
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1<\/span><\/p>\n

What is pump-and-dump?<\/strong><\/p>\n

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Pump-and-dump is a manipulative scheme that drives up a cryptocurrency\u2019s price before a sharp collapse. Large holders artificially \u201cpump\u201d the price so they can later \u201cdump\u201d at the highest possible levels to small traders. The result is a falling price and losses for investors.<\/p>\n

The scheme long predates cryptocurrencies, having emerged in the securities market. The first documented case was<\/a> the British South Sea Company affair in the early 18th century, which inflated its share price with false promises of profit and led to the South Sea Bubble.<\/p>\n

Later, pump-and-dump was widely used in America\u2019s market for \u201cjunk\u201d or \u201cpenny\u201d stocks during the Great Depression<\/a> of the late 1920s and early 1930s. Brokers sold cheap shares to one another to create the appearance of demand and rising prices, then dumped them on the public market. Such practices were later outlawed in the United States. On the stock market, the heyday of pump-and-dump peaked<\/a> in the early 2000s.<\/p>\n

In almost unchanged form, pump-and-dump migrated to crypto, helped by a lack of regulation. There are now around two thousand \u201cjunk\u201d cryptocurrencies. Messaging apps and social networks offer vast audiences, making the scheme highly popular in crypto.<\/p>\n

Over crypto\u2019s short history there have been tens of thousands of pumps. By the estimates<\/a> of researchers at Imperial College London, at least two such scams are carried out daily, yielding organisers average monthly profits of about $7m.<\/p>\n<\/div>\n<\/div>\n

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2<\/span><\/p>\n

How does pump-and-dump work?<\/strong><\/p>\n

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After choosing an exchange and a coin, organisers quietly buy up tokens in small tranches to avoid triggering an early price move. These are usually obscure, low-cap cryptocurrencies\u2014so\u2011called \u201cshitcoins\u201d. Sometimes relatively large coins are used too.<\/p>\n

Once accumulation is done, the pump begins. Messaging apps, news feeds, social networks and exchange chats tout an imminent price surge and name the trading venue. There, the organisers\u2019 bots place and pull large buy orders to lift quotes. This is the first wave of the pump.<\/p>\n

Most big bitcoin exchanges restrict such activity and their listed coins rarely suit the scheme. But some popular venues list more than two hundred coins\u2014and those attract fraudsters first.<\/p>\n

False talking points about partnerships, investments or technological upgrades are used to stoke buyers. Paid \u201cexperts\u201d join the disinformation push. \u201cSensational\u201d tidbits spread mainly via Telegram channels, many of which openly advertise a pump and promise profits.<\/p>\n

Investors then assume that, armed with advance notice, they can profit. In reality they are already victims; some even pay for subscriptions to such pump channels.<\/p>\n

If the promotion succeeds, a second wave follows as outside investors pile in and propel the price further. Amid the frenzy, organisers sell at inflated levels, after which the price typically returns to where it started.<\/p>\n<\/div>\n<\/div>\n

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3<\/span><\/p>\n

What types of pump-and-dump are there? <\/strong><\/p>\n

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Crypto pumps are classed as short-term or long-term.<\/p>\n