Pump and Dump Cryptocurrency: How Does it Happen?

Though digital coins and blockchain technology are relatively new, they are still prone to the same old types of scams that have been around for years. One of these scams is the pump and dump schemes.

Pump and dump schemes are illegal on regulated crypto exchanges. However, the unregulated crypto field has provided a rich ground for the schemes because users are sure they will not be easily caught by authorities.

For some in the blockchain niche, the main question is: “How do pump and dump schemes take place?” This post takes a closer look at the schemes to determine the process used to run them.

What Exactly is Pump and Dump?
Cryptocurrency pump and dump schemes represent a situation where an individual or group of persons plans to make a profit by pumping an asset into the market. The term “pumping” is used to indicate the purchasing of large quantities of coins to push the demand and price of respective coin up.

Then, they release the assets at a higher price to rake in a high return on investment. The scammers take advantage of the market dynamics of supply and demand to make investors see the price movements as a normal trend.

In many cases, scammers target new and unpopular coins that do not require a lot of money to manipulate. For example, scammers would rarely think of Bitcoin pump and dump to provoke a Bullish run because it would require a lot of money.

To rake in more from pump and dump schemes, scammers also target initial coin offerings (ICOs) because many investors are psychologically prepared to make a purchase. The ICO is preceded by intensive lobbying that target to showcase the pumped asset in good light.

How Dump and Pump Works
At the center of pump and dump schemes is a team of tech-abled, motivated, and organized players. These players operate from different points to make the publicity look genuine.

The team often includes investors who provide funding to buy the tokens and raise the demand. If the token selected is a low volume type asset, buying most of them allows scammers to control the supply and regulate the price.

As the inner team focuses on creating artificial supply, another team is working hard to demonstrate the good side of the tokens. In the past, scammers would use word of mouth to encourage people to buy dump and pump shares.

Today, scammers find it easy to motivate crypto buyers by using social media platforms such as Telegram, Facebook, and Twitter. Scammers even form groups and use influencer marketers to spread the ‘good’ word about the tokens.

Investors and traders rush to buy the tokens in fear of missing out at a high price. Once the scammers finally sell all their tokens, the hype and demand fizzles. The price suddenly crashes as investors realize it was a scam. But it is already too late!

The following figure demonstrates how a typical pump and dump looks.



Though digital coins and blockchain technology are relatively new, they are still prone to the same old types of scams that have been around for years. One of these scams is the pump and dump schemes.

Pump and dump schemes are illegal on regulated crypto exchanges. However, the unregulated crypto field has provided a rich ground for the schemes because users are sure they will not be easily caught by authorities.

For some in the blockchain niche, the main question is: “How do pump and dump schemes take place?” This post takes a closer look at the schemes to determine the process used to run them.

What Exactly is Pump and Dump?
Cryptocurrency pump and dump schemes represent a situation where an individual or group of persons plans to make a profit by pumping an asset into the market. The term “pumping” is used to indicate the purchasing of large quantities of coins to push the demand and price of respective coin up.

Then, they release the assets at a higher price to rake in a high return on investment. The scammers take advantage of the market dynamics of supply and demand to make investors see the price movements as a normal trend.

In many cases, scammers target new and unpopular coins that do not require a lot of money to manipulate. For example, scammers would rarely think of Bitcoin pump and dump to provoke a Bullish run because it would require a lot of money.

To rake in more from pump and dump schemes, scammers also target initial coin offerings (ICOs) because many investors are psychologically prepared to make a purchase. The ICO is preceded by intensive lobbying that target to showcase the pumped asset in good light.

How Dump and Pump Works
At the center of pump and dump schemes is a team of tech-abled, motivated, and organized players. These players operate from different points to make the publicity look genuine.

The team often includes investors who provide funding to buy the tokens and raise the demand. If the token selected is a low volume type asset, buying most of them allows scammers to control the supply and regulate the price.

As the inner team focuses on creating artificial supply, another team is working hard to demonstrate the good side of the tokens. In the past, scammers would use word of mouth to encourage people to buy dump and pump shares.

Today, scammers find it easy to motivate crypto buyers by using social media platforms such as Telegram, Facebook, and Twitter. Scammers even form groups and use influencer marketers to spread the ‘good’ word about the tokens.

Investors and traders rush to buy the tokens in fear of missing out at a high price. Once the scammers finally sell all their tokens, the hype and demand fizzles. The price suddenly crashes as investors realize it was a scam. But it is already too late!

The following figure demonstrates how a typical pump and dump looks.