Does Pump and Dump work?

[nrd525]

People talk a good bit about using pump and dump to make money, but I'm wondering if it really works?

I think in the stock market the "pump" method often involves information or getting other people to help you magnify the price increase from your medium investment (and then you sell out while the price is still increasing - near the peak).  But for bitcoin, people talk about pumping as if a single person would be pumping up the price by themselves.  If they do that and bid the price up so that there aren't any bids for it, how are they going to dump it?

[smoothie]

If done right it does. IXC, IOC, and SC were all pumped and dumped.

Even NMC in June '11.

But it's all speculation driven too.

[ElectricMucus]

Of course it works, the trick is not to be the sucker who buys last.
That said it depends on your definition of "working".

[Bjork]

people talk about pumping as if a single person would be pumping up the price by themselves.  If they do that and bid the price up so that there aren't any bids for it, how are they going to dump it?

The idea is to incite panic buying, so others help drive the price up

[GeniuSxBoY]

Depends on the density


If you buy 100000 @ $9 and run it up to $10 for only 10000 coins and hold it there for a while.

then dump it when there is a heavy buy density closer to $10, then you profit.



Of course, the opposite loses you money.

[Vandroiy]

All manipulation moves cost money if other traders notice them. They'll just hold against you for the heck of it and profit.

So it really depends on how many people at what point in the "food chain" are around. If it's all sheep who follow active trends, the method wins. If it's all people trading on fundamentals and ignoring you, the method loses.

[ArticMine]

All manipulation moves cost money if other traders notice them. They'll just hold against you for the heck of it and profit.

So it really depends on how many people at what point in the "food chain" are around. If it's all sheep who follow active trends, the method wins. If it's all people trading on fundamentals and ignoring you, the method loses.

+1 There are many profitable methods to trade somebody else's market manipulation and better still unlike the market manipulation itself these methods are perfectly legal.

[Spekulatius]

All manipulation moves cost money if other traders notice them. They'll just hold against you for the heck of it and profit.

So it really depends on how many people at what point in the "food chain" are around. If it's all sheep who follow active trends, the method wins. If it's all people trading on fundamentals and ignoring you, the method loses.

+1 There are many profitable methods to trade somebody else's market manipulation and better still unlike the market manipulation itself these methods are perfectly legal.

In some regulated markets, its illegal

http://en.wikipedia.org/wiki/Layering_%28finance%29

[ArticMine]

All manipulation moves cost money if other traders notice them. They'll just hold against you for the heck of it and profit.

So it really depends on how many people at what point in the "food chain" are around. If it's all sheep who follow active trends, the method wins. If it's all people trading on fundamentals and ignoring you, the method loses.

+1 There are many profitable methods to trade somebody else's market manipulation and better still unlike the market manipulation itself these methods are perfectly legal.

In some regulated markets, its illegal

http://en.wikipedia.org/wiki/Layering_%28finance%29

Layering is a form of market manipulation and in many markets is in fact illegal. It is also a very good example. So I am a long term investor and I am looking to build a long term position in an illiquid market. I sit and wait and when an ask wall shows up I buy it at market. How is this illegal?

Now if this ask wall was part of a layering market market manipulation there is a good chance that the manipulator can get caught in a nasty short squeeze and provide me with additional profit.