pump and dump

Pump and Dump is an illegal manipulative strategy employed in the cryptocurrency market with the aim of artificially inflating the value of a particular cryptocurrency to later sell it at a profit. This practice can lead to massive financial losses for investors who unknowingly participate in such schemes.

How Does Pump and Dump Work?

In the case of the Pump and Dump strategy, a group of fraudsters typically collaborates to increase the price of a specific cryptocurrency through massive purchases. They first circulate positive information about the currency, attracting investors’ attention and causing the price to rise. Then, when the price reaches the desired level, the scammers sell their assets, resulting in a sudden drop in value.

Why Is Pump and Dump Illegal?

Pump and Dump is illegal because it violates the principles of fair trading in financial markets. Such manipulation of cryptocurrency prices misleads investors and can lead to significant losses. Market regulations aim to protect market participants from such practices and prevent price manipulation.

How to Recognize Pump and Dump?

Investors should be aware of certain signals that may indicate the execution of Pump and Dump schemes. They should watch out for sudden and unjustified price increases, sharp value declines following such increases, and abrupt changes in trading volume. Additionally, it is advisable to be cautious about information from unverified sources, especially those promoting quick profits.

How to Protect Yourself from Pump and Dump?

To avoid falling into the Pump and Dump trap, investors should exercise caution and thoroughly research any cryptocurrency they plan to invest in. It is also advisable to use reputable trading platforms and steer clear of suspicious investments promising fast returns. Monitoring the market and being aware of the risks associated with trading cryptocurrencies are good practices.

Pump and Dump is a harmful practice that can have serious consequences for investors. Therefore, it is important to be aware of the risks associated with cryptocurrency price manipulation and make investment decisions thoughtfully and consciously.