The term Pump and Dump is a fraudulent strategy used in financial markets, especially in stock and cryptocurrency markets. This strategy relies on manipulating asset prices by spreading false or misleading news to artificially inflate the asset's price (Pump) and then quickly selling it to realize profits before the price collapses (Dump).
How does the process work?
1. False promotion: Fraudsters buy large quantities of a specific asset (like a stock or cryptocurrency) and then heavily promote it through social media, forums, or even fake news, prompting other investors to buy it.
2. Price increase: Due to increased demand resulting from promotion, the price rises sharply.
3. Sudden selling: Once the price reaches a certain level, the fraudsters sell their holdings to realize significant profits, leading to a rapid price collapse.
4. Losses for new investors: Investors who bought the asset at its peak are left with significant losses when the price collapses.
Famous examples
• This phenomenon often occurs in cryptocurrencies, where groups organize pump and dump schemes on small coins.
• Cheap coins are sometimes exploited in the same way.
How do you protect yourself?
• Avoid getting swept up in the hype: Do not invest based on unreliable news or recommendations from strangers.
• Watch trading volume: An unexplained sudden increase in trading volume may be an indicator of a Pump and Dump scheme.
• Look for true value: Invest in assets that have strong fundamentals, not just based on rumors.
Wishing you abundant profits..$