When I started crypto trading in 2017, I was looking for the easiest way to make money as a trader, one that didn’t require much effort.
I came across a crypto pump and dump scheme on Telegram.
I decided to join and learn how it works before participating with my little capital.
A few days after I joined the channel, they pumped a coin on one of the exchanges and made a 500% profit.
That was enough to convince me to participate in the next pump and dump because I saw it as easy money.
But in reality, that was not the case. In the later part of this article, I will share reasons why you should avoid crypto pump and dump groups, especially as a beginner.
What Is Crypto Pump And Dump?
Crypto pump and dump is a form of market manipulation where the price of a cryptocurrency
Is artificially inflated (pumped) through coordinated buying activities and promotional efforts
Across social media followed by a sudden sell off by the perpetrators causing the price to crash.
This scheme typically involves a group of people who put their capital together and buy a cryptocurrency that has a low price and market cap.
Such cryptocurrency only requires a little money to manipulate because of the low price.
How To Recognize Crypto Pump And Dump Schemes?
1. Aggressive Promotions
Crypto pump and dump schemes often involve aggressive marketing tactics such as spam emails, social media shilling,
Or using online forums to hype the coin and promise quick profits.
They often invite you to join their Telegram or Discord channel, where they announce a pending pump at a specific date and continue to prepare their members for the upcoming pump.
Most pump and dump schemes claim they don’t have prior knowledge of the coin about to be pumped.
According to them, a bot selects the cryptocurrency at random, but that’s not true.
The organizers have pre-identified the crypto they want to pump before the announcement date and have been quietly accumulating it ahead of the pump.
2. Unusual Trading Volume
If a cryptocurrency experiences a sudden surge in volume and price within a very short time,
That’s a sign of a pump and dump because a lot of people are buying, which causes the price to increase, followed by a sharp dump. All of these happen within 5 minutes.
As more people buy the crypto, the volume increases, and the organizers of the scheme sell their accumulated holdings and exit the market.
3. They Buy Tokens With No Value
Most pump and dump schemes buy cryptocurrencies with low prices and no real value, which makes them easy to manipulate since it takes less capital to influence the prices.
It also means it would cost less to accumulate the crypto since the price is low.
When the crypto is announced, their members start buying immediately, which increases the price and attracts other traders due to FOMO.
At that moment, the organizers dump their holdings
4. Secrecy And Lack Of Transparency
Organizers of pump and dump schemes often operate anonymously, choosing to use platforms such as Telegram and Discord to hide their identity.
They lack transparency about their activities and often claim they want everyone on their channel to make a profit, but in reality, they are doing it for themselves.
Why You Should Avoid Pump And Dump Schemes
5. You Would Likely Lose Your Money
Crypto pump and dump schemes are designed in a way that allows the organizers to accumulate a significant amount of cryptocurrency at a low price before the announcement date.
When they announce the crypto on the said date, it’s already pumping.
You would buy at the top, aiming to sell higher, but unfortunately, the organizers would dump their tokens, leaving you to hold the bag of a worthless coin.
I have participated in a pump and dump in the past, and the trade was so fast that it would be hard for you to sell your crypto after buying it at a high price.
Most people who participate in crypto pump and dump lose money, but they keep doing it because they believe they will eventually make it big.
6. Lack Of Long-Term Viability
Trading based on pump and dump is not a long-term plan for a trader who wants to be successful because it hangs on so many factors you can’t control, making it extremely difficult for you to be profitable.
Most traders who focus on pump and dump lose their capital within a short time.
7. Supporting Unethical Behavior
By participating in pump and dump schemes, you indirectly support unethical behavior and contribute to market manipulation in the cryptocurrency ecosystem.
These schemes exploit investors’ naivety and greed for personal gain and undermine the trust and confidence in the broader cryptocurrency market.
What To Do Instead Of Joining Crypto Pump And Dump Schemes
8. Focus On Crypto Education
After participating in my first pump and dump, I decided to quit because it wasn’t a sustainable model, and it would result in consistent losses.
Instead, I focused on learning how to become a profitable trader through education.
I bought books and started watching YouTube videos on crypto trading. Eventually, I discovered a trading strategy that consistently made me profits.
There’s no shortcut to trading. To be successful, you have to learn, implement, and make mistakes.
Crypto pump and dump schemes appear like a shortcut to making money in trading, but in reality, they’re the fastest way to lose your money, and you won’t learn anything in the process, unlike if you were trading on your own.
9. Participate In Legit Crypto Projects
Most crypto pump and dump schemes buy worthless projects that have no value because they are cheap, and the price can be easily influenced.
Instead, buy only well-known crypto projects such as Bitcoin, Ethereum, and Ripple.
These are well-established cryptocurrencies, and their value tends to increase over time.
10. Get A Trading Coach
I can’t stress this enough: if you’re a new trader, try and get a trading coach.
A trading coach would help you on your journey to becoming a profitable trader.
If you have a coach, he can help you avoid mistakes that could ruin your trading account.
Frequently Asked Questions
Is Crypto Pump And Dump Profitable?
Crypto pump and dump are hardly ever profitable if you’re not one of the organizers of the scheme.
Most people who participate in pump and dump schemes lose money, but they don’t quit because they believe their lucky day will come.
How Long Do Crypto Pumps And Dumps Last?
Most pump and dump events occur within five minutes. When the announcement is made to buy a specific crypto, the price has already risen, so you’re buying at the top, and they dump on you, leaving you as the bagholder.
Is Pump And Dump Illegal In Crypto
Pump and dump is illegal in most financial markets, such as stock and forex, but there is no law against it in crypto trading, although it’s a violation of most crypto exchanges’ terms of service.
