A sudden pump and dump in the crypto market is often a **whale trap**, a manipulation strategy used by large investors (whales) to exploit retail traders. This strategy involves rapid price swings designed to lure in unsuspecting traders before a sharp reversal wipes them out.

**How a Whale Trap Works**

1. **The Pump (Artificial Price Surge)**

- Whales start accumulating a cryptocurrency, buying large amounts within a short time.

- The sudden demand causes the price to rise sharply, often triggering excitement and speculation in the market.

- Retail traders notice the surge and rush to buy, fearing they might miss out (FOMO).

- This additional buying pressure further inflates the price, making the asset appear bullish.

2. **The Dump (Sudden Sell-Off)**

- Once the price reaches a desired peak, whales begin offloading their holdings at inflated prices.

- This sudden wave of selling causes panic in the market as prices drop rapidly.

- Retail traders, caught off guard, try to sell to minimize losses, creating even more downward pressure.

### **Why Do Whale Traps Happen?**

- **Liquidity Exploitation**: Whales need liquidity to execute large trades. By artificially inflating prices, they attract enough buyers to create exit liquidity.

- **Market Psychology**: Many retail traders rely on emotional trading rather than strategy, making them easy targets.

- **Leverage Liquidations**: If many traders use leverage, sudden price swings can trigger liquidations, forcing even more aggressive price movements.

### **How to Avoid Whale Traps**

- **Look for Unusual Volume Spikes**: Sudden, massive spikes in trading volume without strong fundamentals can signal manipulation.

- **Avoid FOMO Trading**: If a coin suddenly pumps with no clear reason, be cautious instead of jumping in.

- **Check Order Books**: Large buy walls followed by sudden large sell orders may indicate a whale trap.

- **Use Stop-Loss Orders**: Protect your capital by setting reasonable stop-loss levels to minimize potential losses.