What is a "Pump and Dump" in crypto?
let's understand some basic knowledge ..
A pump and dump scheme is a form of market manipulation where the price of an asset (like a cryptocurrency) is artificially inflated (pumped) through misleading or exaggerated statements and social media hype. Once the price reaches a certain level, the orchestrators of the scheme (often large holders or "whales") sell off their holdings, causing the price to crash (dump) and leaving other investors with significant losses.
Why does Pepe (and other meme coins) experience this?
* No Intrinsic Value or Utility: Meme coins like Pepe are often created with no real-world utility, underlying technology, or formal team/roadmap. Their value is almost entirely driven by speculation, social media trends, and community hype.
* Low Liquidity: Often, a few large holders control a significant portion of the coin's supply. This makes it easier for them to manipulate the price by buying and selling large amounts.
* FOMO (Fear Of Missing Out): When a meme coin suddenly surges, retail investors, afraid of missing out on potential profits, pile in, further fueling the pump. This creates an environment ripe for the "dump."
* Influencer Shilling and Rumors: Viral tweets, unconfirmed exchange listings, and celebrity mentions can quickly drive up interest and price, even if based on little substance.
How do investors incur losses?
Investors incur losses when they buy into the pumped price, driven by FOMO, and then the price crashes when the orchestrators or early investors sell off their holdings. Those who bought at the peak are left "holding the bag" with assets worth significantly less than what they paid.
