What are Pumps and Dumps in Crypto & how are they Done
I came back with another interesting topic on what is pump and dump in Crypto markets and how it is done.
What Is pump & dump?
Pump and dump is a process where buy a whale investor or a group of many investors influence the price movement in order to gain massive profits over short time influencing other traders with the intention of selling later offloading their assets to the public and therefore making the price fall hard.
How is it done?
This is widely done is Centralized in exchange platforms like Binance, Crypto.com and so many other where there is direct trading interaction between different traders fro world wide.Firstly lets say a whale investor spotted a Crypto asset which is undervalued an it has low supply he can buy a lot of those tokens. Obviously he will have a group of traders who will be following his/her signals daily. Once her acquires as much as he can he then give a signal to the rest of the traders to buy and hold and this will push the price up in minutes even in seconds, that is pumping.
Then when the price hits certain levels where they expect to take their profits they then dump the assets forcing the price to fall, that is dumping.
The above picture has a clear picture of how it is done, as we can all see the price started at loss and it was pumped up to the top then its was later on dumped and it fell below and now its trading close to its opening price. Now those who entered as a result of FOMO are now back to where they started. They were just used to provide liquidity to the whales.Traders makes millions with this as they just buy a lot of assets and dump them.
That is why it is always said never trade the news in the Crypto and financial markets as that is used to hake the markets an that is how prices are manipulated so its wise to stay away from news.
CONCLUSION
If you are to participate in the pump and dump make sure you know when to buy and when to sell or just make sure you trade with the whales and do whatever they are doing that moment.
