"Pump and dump" (P&D) is a form of market manipulation that involves artificially inflating the price of an owned stock or currency in order to sell the cheaply purchased stock at a higher price. Since cryptocurrency is an unregulated market, this method is not illegal.
There are two parties involved in a pump and dump. The first are the market players that “pump” a token— commonly a less-popular cryptocurrency, colloquially referred to as a “shitcoin”. These players buy up a significant amount of these coins, which increases the price of the coin and then they begin promoting them across social media.
At this point, the “pump” begins to take hold across social media, which causes external investors to begin purchasing the token. Smaller investors often buy in at this point due to the FOMO, or “fear of missing out” effect. This causes the value of the token to increase further, sometimes over 100% in about 10mins or less.
Once the pump has caused token value to increase dramatically, the original pump group then sells off their token holdings bit by bit in a coordinated move so the price dosent go down in a slump.
When other later investors notice a significant decline in price, some begin to sell. This massive sell-off causes the value of the token to plummet, “dumping” the token price.
The pumpers then walk away with massive profits. Those not included in the pump and dump group, but that have sold at the beginning of the decline still make substantial profits.
How can you benefit from pump and dump?
The only way to do this is to have early knowledge of the date, time, coin and venue of the pump.
You can do this by joining a pump group.
To be clear, In the regular securities and trading market, pump and dump is illegal, but in the crypto market, it is not illegal.
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