The pump and dump of crypto.

A pump-and-dump scheme is a type of fraud in which the offenders accumulate a commodity over a period, then artificially inflate the price through means of spreading misinformation (pumping), before selling off what they bought to unsuspecting buyers at the higher price (dumping). Since the price was inflated artificially, the price usually drops, leaving buyers who bought on the strength of the false information at a loss.

What the crypto currency is?

Crypocurrencies are a digital medium of exchange, and they usually rely on cryptography instead of a central institution to prevent problems like counterfeiting. For example, the most popular cryptocurrency is Bitcoin (BTC), and some of its benefits are that it allows for trustless and de-centralised transactions since it is impossible to reverse a payment, and there are no third parties (e.g., banks)

Pump-and-dump schemes in the traditional economic context

In the early eighteenth century, con artists who owned stock in the South Sea Company began to make false claims about the company and its profits. The goal was to artificially raise the price of the stock, and then sell it off to misinformed buyers who were led to believe that they were buying a promising commodity. This was referred to as the South Sea Bubble and serves as an early documented example of a P&D scheme (Bartels 2000; Brooker 1998).

In modern times, P&D schemes have predominantly been Internet-based focusing on so-called “penny” or “microcap” stocks, which are smaller companies that do not meet the requirements to be listed on the larger exchanges.