What is Pump and Dump Scheme?

[Yaunfitda]

We always heard the term "Pump and Dump", so I created a beginners guide on it.

What is Pump and Dump Scheme?

Investopedia defines it as "scheme that attempts to boost the price of a stock (or in this case cryptocurrency) through recommendations based on false, misleading or greatly exaggerated statements."

How Does it Works?

Typically a person or group of persons will:

1. Buy a lot of shitcoins in advance at a very low price

2. Then they shill that shitcoin all over, from this community to other social media sites, including emails, paid press release with catchy phrase like "the next bitcoin", or the next "100x-1000x coins"

3. Usually you will find this groups in Telegram promoting "trading signals"

4. Crypto investors bought the hype, the price of that shitcoins gradually increases and skyrocket.

5. And when the trading volume is at the peak, the group will start to call for a sell to their members

6. However, they have sold already and what's left is just a few money shared by low level members

How Do We Spot a Pump and Dump Scheme?

1. Shitcoin that you haven't heard before suddenly being promoted in a lot of social media platforms like Facebook and Twitter

2. The people behind the coin has a history of shady projects

3. The price of the shitcoin grows tremendously in matter of days

How Do We Avoid Pump and Dump Coins?

1. Educate yourself. We really can't stress that enough. If you join crypto-sphere, learn and equip yourself with knowledge

2. Don't get excited and don't FOMO.

3. Always Do Your Own Research (DYOR)

4. Don't pay or join any pumping groups


https://www.investopedia.com/terms/p/pumpanddump.asp

Sorry about the infographic using canva, first time to create it, I need more learning curve.  

For in-depth analysis:
https://www.researchgate.net/publication/329206760_The_Anatomy_of_a_Cryptocurrency_Pump-and-Dump_Scheme

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[NotATether]

How Do We Avoid Pump and Dump Coins?
~

Or, just stick with bitcoin and don't buy any altcoins? That'll avoid all of them.

[BIT-BENDER]

3. Usually you will find this groups in Telegram promoting "trading signals"

Timelessly list of telegram pump and dump group has been posted,
https://bitcointalk.org/index.php?topic=2887116.0
There strategies, prediction, advice, info graph, are a chameleon acts to put their member in their train of descriptions. Altcoins, ico interested newbie take note, about the lies about pump and dump.

[Cnut237]

I would add that it doesn't have to be a shady project, it just has to be a small one in terms of marketcap. Anyone can become a whale with a very small coin. The smaller the cap, the easier in general to manipulate the market.
I'd add another massive red flag as well - if a coin is rising dramatically and there is no obvious reason for that rise, then it is almost guaranteed to be PnD or else runaway FOMO - in either case steer well clear.

[BrewMaster]

i don't think definition of investopedia which is for stocks work in altcoin market. the altcoins pump and dumps don't need recommendation or even hyping people up to buy the shitcoin, although that is sometimes the strategy they use.
instead it works based on the small size of the altcoin market. as a matter of fact if you check the market you can see the smaller the shitcoin the easier it is to pump it and those pumps are always the biggest and fastest.
all the pumper has to do is to start buying that shitcoin with a little bit of money and do some other stuff (like placing buy walls, ... that i don't want to get into here) to encourage other day traders to come join that pump. and since many are looking for these pumps on a daily basis to make profit, they do join and the pump keeps snowballing until the dump starts.

[DdmrDdmr]

This is an in-depth paper I’ve found on Crypto Pumps and Dumps:
https://www.researchgate.net/publication/329206760_The_Anatomy_of_a_Cryptocurrency_Pump-and-Dump_Scheme

The paper seems pretty serious, and studies:

<…> 412 pump-and-dump activities organized in Telegram channels from June 17, 2018 to February 26, 2019, and discover patterns in crypto-markets associated with pump-and-dump schemes.

The study looks pretty neat, and ends up explaining a predictive model they created based on the data they amassed. It goes on to providing interesting information on things such as what Exchanges they took place on, not because the Exchange organized it (necessarily), but because it was the targeted platform for the event. Their study mentions Binance, Cryptopia, Yobit and Bittrex, but surely there are many more.

[RapTarX]

Almost all the trading signal groups are associated with pump and dump group. Last year, I was offered to join such a group; that's how I discovered that all these group provide trading signal to gather newbie investors and pump certain coin to achieve their goal. Most of their signal followers get ripped off most of times.

[The Cryptovator]

Well explain. I have encountered such as pump on the telegram channel although I hadn't participate but follow them. Actually they were well prepared and start sending notification from one day before. Next day send multiple notification to become prepare. And eventually they announced coin name. But when I saw the price chart price was already pumped. How possible get profits by entering pumped coin? Then coin start dumping and dumped. So I believe so many peoples got REKT during that time. Actually I don't believe any such as quick profits method nor I had participated such as signal.

[skarais]

This is a scheme that must be avoided by beginners. It is good that you share it here, because this scheme will only cause deep disappointment to anyone who is the final holder of the assets (unlucky traders). The quick profit is a tempting offer, but I believe that this scheme is part of an effort that will end in a lot of scam.

[TravelMug]

Well explain. I have encountered such as pump on the telegram channel although I hadn't participate but follow them. Actually they were well prepared and start sending notification from one day before. Next day send multiple notification to become prepare. And eventually they announced coin name. But when I saw the price chart price was already pumped. How possible get profits by entering pumped coin? Then coin start dumping and dumped. So I believe so many peoples got REKT during that time. Actually I don't believe any such as quick profits method nor I had participated such as signal.

When I was just starting my crypto journey, someone recommend me this kind of 'strategy. I even have to wake up early in the morning to catch up with the supposed pump and eventual dump. But I didn't profited as expected and got REKT a few times.

That's why I stay away from this so called Pump-and-Dump and it's a good lesson for me. So I would agree on not joining any, specially if you are a beginner and think that this could make you a lot of money or quick profits.

[NavI_027]

How Do We Avoid Pump and Dump Coins?
~

Or, just stick with bitcoin and don't buy any altcoins? That'll avoid all of them.

Hahaha it makes sense for me . With altcoins, you can expect an end after most of the investors dump their coins because that's the moment when it becomes a sh*tcoin. No one wants to buy a sh*tcoin, right? While on the side of bitcoin, many will choose to trust it over and over again thus the cycle never eneds. It was well founded and too worthy to dump it forever.

[Yaunfitda]

How Do We Avoid Pump and Dump Coins?
~

Or, just stick with bitcoin and don't buy any altcoins? That'll avoid all of them.

As much as we don't like altcoins, they are part of the whole cryptocurrency market.

[..]

I just use their definition as basis only, much simplier to understand.

[..]

Thanks for the info, will add it up.

[..]

I think our first experience with this kind of fraudulent people are thru Telegram and they are really good at making us very comfortable and believed on everything they say that's why we fell for it.

[..]

Don't be disappointed, you are not the first one and won't be the last. That's why we need to remind everyone here.

[LbtalkL]

How Do We Avoid Pump and Dump Coins?
~

Or, just stick with bitcoin and don't buy any altcoins? That'll avoid all of them.

That's the safest thing to do,  but bitcoin alone is like an island, Altcoins add colors to the blockchain with different features and specific use cases. We just need to dig deeper into every altcoin we are trying to jump in. I guess the top 10 altcoins on CMC are safer than newly created projects, so just stick to the projects with a good reputation.

How Do We Avoid Pump and Dump Coins?

We can also avoid Pump and Dump projects by avoiding and not listening to those influencers like Mcafee. Recently, I have witnessed one of his projects doing a pump and dump scheme. This project is Switch (ESH) it goes over $2 because he is shilling his new coin/token called ghost and after the snapshot, ESH went down to $0.1 

[Becky666]

Good explanation, many of those who engaged on the scheme of pump and dump are mainly project developers down to their administrators: Back in 2019 I was asked  by a friend whom I meant on a group to join their pump and dump group, though I joined the group before find out their intentions of a particular token(name withheld) which was their means of defrauding newbies on the group, they did the first phase of their dubious act and succeeded but due to my little knowledge from this platform I decided to take my exit. Let's learn not to be greedy in life.

[Assface16678]

As we can see at the start of the bitcoin it flows a good way because while the time goes by there are a lot of changes and an increase of a number of supporters to earn more investors and now after a few years it becomes one of the most successful coins. By this kind of coin, many people want to become popular and manage their own coin so the outcome they made the same as the bitcoin and we called them now as the altcoins or some of them are the shitcoins according to OP. We cannot blame them if they want to make their own coin one of the problems is some of the people do not have enough knowledge to these new coins are getting easily scammed by the sweet prediction of the people on the group on the telegram one of the examples of OP and of course, if you are a typical person that you want to more money because of the urge of earning a lot you will follow the prediction of other people that will cause to buy a lot of money but at the end, you will not get anything because it's just a no value coin and not successful after a few months if promotions.

How Do We Avoid Pump and Dump Coins?
~

Or, just stick with bitcoin and don't buy any altcoins? That'll avoid all of them.

For me, one of the safest things in terms of investment is on the Bitcoin also we already know, proven, and tested the market volatile and the earning on bitcoin which is a good thing. But still, there is another what if one of those altcoins will become the same as the bitcoin for over a few years.

[Harlot]

Almost all the trading signal groups are associated with pump and dump group. Last year, I was offered to join such a group; that's how I discovered that all these group provide trading signal to gather newbie investors and pump certain coin to achieve their goal. Most of their signal followers get ripped off most of times.

Trading signal channels in Telegram groups are indeed meant for pumping and dumping shitcoins. Most of them will give you "signals" of an unknown cryptocurrency available in either a small crypto exchange or just a few crypto exchanges this just gives you an idea why the hell are they recommending a unknown crypto for you to buy and gives you an specific time and date on when it will be pumping. Of course the signal they just gave to you is really not meant for you to profit but for their anticipation to profit people who fell victim to this kind of scam are always the ones who are dependent to what they are seeing and always believe in it rather than do real research about why they are recommending it.

[AakZaki]

Timelessly list of telegram pump and dump group has been posted,
https://bitcointalk.org/index.php?topic=2887116.0
There strategies, prediction, advice, info graph, are a chameleon acts to put their member in their train of descriptions. Altcoins, ico interested newbie take note, about the lies about pump and dump.

I once followed and became a member of a pump group like that. Many lies that happen, they only prioritize their profits. Members who join are given a signal to buy coins that they want to pump, even though they have bought them first. The more members there are in the group, the more profit they get when the buy signal is spread. they sell it at a high price and other members have to try and need to be faster. Many people get losses from group practices like this.

[tbct_mt2]

There are many types of pump and dump. For all of them, volume is most important indicator.

If volume is small, mostly we see flash pump and dump. With such price actions, it is so difficult to take profits at peaks and the peak prices tend to be reached with extremely low volume. Something should be called as artificial peaks.

If volume is high, and gradually increases before price hits its peak, we have almost naturally pumps and dumps. Because there are real momentum behind the scene and you can have enough time to think of your profits, and also have enough time to take profits.

[pooya87]

There are many types of pump and dump. For all of them, volume is most important indicator.

If volume is small, mostly we see flash pump and dump. With such price actions, it is so difficult to take profits at peaks and the peak prices tend to be reached with extremely low volume. Something should be called as artificial peaks.

If volume is high, and gradually increases before price hits its peak, we have almost naturally pumps and dumps. Because there are real momentum behind the scene and you can have enough time to think of your profits, and also have enough time to take profits.

there is nothing natural about any pump and dumps, they are  always manipulation of the market and illegal in most parts of the world. the slower pumps are just as bad and manipulative as the rest, they are only slower because there are more people involved in that shitcoin being pumped compared to other faster versions that have lower volume and fewer traders involved (move traders sell more and slow down the pump). on top of that people lose money in both schemes all the same.

[Dariusburst]

The perfect pump and dump coins are those with very low market cap, they have no good use case and less popular, you want to avoid this? Don't buy any low market cap coins that's surging for no reason, buy coins when price is surging is a huge trap