What is a pump and dump
Some traders use a cryptocurrency quote manipulation scheme known as “Pump” and “Dump”. In traditional exchanges, this practice is illegal and strictly regulated. However, due to the lack of rules for cryptocurrency trading in many countries, crypto market players are forced to independently develop countermeasures.
Pump is a market situation that leads to a very fast and fundamentally unreasonable increase in the rate of cryptocurrency. This usually happens due to the deliberate actions of experienced traders. Most often, a successful Pump is accompanied by a rollback of the price or the so-called reset.
Dump is a market situation completely opposite to Pamp. A dump is a deliberate disposal of assets in large quantities in order to artificially reduce rates in the short term. Pump and Dump allow manipulators to earn money from inexperienced currency holders who bought coins at artificially high prices.
How to detect a pump
Large-scale actions cannot be launched just like that, because almost always they are thought-out and coordinated actions of several (tens, hundreds) people. They need a lot of money for big campaigns, especially if they are going to raise a more or less well-known currency.
Signs of Pamp in cryptocurrencies
So, what should users pay attention to to find similar processes in the market? Here are some signs of a pumped currency that will allow you not to be trapped in your investment.
- The publication of various materials on different thematic resources about the currency. It happens that articles of this kind appear in the official media, which are trusted by thousands of people.
- Focusing on a specific cryptocurrency using various news releases is one of the tools that manipulators use for large investments in a future (read disastrous) transaction.
- Usually, before such news appears on the network, someone buys large amounts of this particular digital money.
- In addition, the instigators of such transactions are trying to establish restrictions on the purchase of digital money, using bots or doing it with their own hands to create promising dynamics of a certain currency rate.
- A pump in trading can also be recognized if some cryptocurrency is suddenly started to be boosted in various forums / chats. Sometimes it is difficult to understand whether this information is real or fake, but it is necessary to study this issue very carefully.
Large-scale pumping never begins simply for no reason. It is preceded by specific signals:
- Massive PR of previously unknown cryptocurrency.
- Distribution of news that attracts attention.
- Creating a storm of excitement around cryptocurrency by experienced traders. This is most often seen in forums and chat rooms on certain cryptocurrency sites.
By following these signals, an experienced trader can predict the pump and have time to enter it with the beginning of the first wave (when Pampas or Pump groups begin to buy cryptocurrencies en masse). However, it is quite difficult to notice and respond to these signals in time. To do this, you have to constantly monitor the market charts of many cryptocurrencies.
What are the main types of pump
- Short-term – the value of the currency rises to an unprecedented height in a matter of seconds. This type of pump requires a large number of traders. Usually, the timer is set at the time when the trading pair for which the cryptocurrency will be purchased is announced. All Pamp participants are informed about the planned% growth. As soon as the time comes to an end, the name of the currency you want to buy is laid out on a public channel. Unscrupulous communities buy this currency in advance and place sales orders 50% higher than the planned percentage of growth.
- Long-term – this is a pump that lasts from several minutes to several days. Currencies and terms are announced in advance. As a rule, really promising coins are chosen here. All participants also receive various news on the chosen currency, which they publish on social networks, chat rooms, exchanges and other places where there are people interested in this. At the same time, there is a gradual process of buying the declared currency.
How to make money on Pampa
- Subscribe to Pump Groups. Even if you do not plan to participate in Pampa, you can simply keep track of their news. Some groups report downloading a site a few days before its launch, and this information can be used for your own earnings.
- Track the pumping of cryptocurrency using special monitoring services. For example, CoinData.
- Use a special bot that tracks pumping in the market. For example, YobitBot, CoinToolsBot and others.
- Create pending orders. Some exchanges (for example, Poloniex) allow you to create a pending order for the sale of cryptocurrency. If you expect pumping, try making short orders at a price several times higher than the current one. For example, if the current value of cryptocurrency is $ 5, set a short order for $ 20 or $ 30. If there really is a pump, the order will work and bring you profit. If there is no sharp jump in the course of the expected period, simply cancel the order. By the way, this is the safest way to make money on Pampa. Suitable for experienced traders who are able to analyze market trends and have free assets to place orders. The average net income of an ordinary investor from Pamp is about 5%. Therefore, the more you invest, the more you can get.
In the world of traditional investment, such schemes are illegal. However, due to the lack of regulation in the field of cryptocurrency, they are very attractive in terms of quick and easy money. Opinions are divided into two groups: those who have lost money call this scheme immoral and criminal, while those who belong to the group of manipulators or know how to use their activities, usually argue that this is a good way to clear the market of “stupid money” and attract investors.
In principle, such schemes are no more immoral than advertising gambling or lotteries on television – where there is money, there is always risk, and without careful analysis, patience, or at least good connections, there will be no profit.