Cryptocurrency pump and how to detect it
Some traders use a scheme to manipulate cryptocurrency quotes known as "Pump and Dump". In traditional exchanges, this practice is illegal and strictly regulated. However, due to the lack of cryptocurrency trading rules in many countries, cryptocurrency players are forced to develop their own countermeasures.
What is Pamp and Dump
Pump is a market situation that leads to a very rapid and fundamentally unreasonable growth of the cryptocurrency rate. It usually occurs due to deliberate actions of experienced traders. More often than not, a successful Pump is accompanied by a price pullback or so-called reset.
Dump is a market situation completely opposite to Pump. Dump is a deliberate disposal of assets in huge quantities in order to artificially lower rates in the short term.
Pump and Dump allow manipulators to make money from inexperienced currency holders who bought coins at artificially high prices.
How to discover Pump
Large-scale campaigns can't just be launched because they are almost always the deliberate and coordinated actions of several (dozens, hundreds) people. They need big money for big campaigns, especially if they are going to raise a more or less well-known currency.
Signs of Pampa in cryptocurrencies
So, what should users look for to detect similar processes in the market? Here are some signs of pumped currency that will keep you from getting trapped in your investments.
- Publication of various materials on various thematic resources about currency. It happens that articles of this kind appear in the official media, which is trusted by thousands of people.
- Focusing on a particular cryptocurrency through various news releases is one of the tools manipulators use to make large investments in a future (read disastrous) deal.
- Usually before such news appears online, someone buys large amounts of this very digital money.
- In addition, the instigators of such transactions try to set limits on the purchase of digital money, using bots or doing it themselves to create a promising dynamic of a particular currency rate.
- Pump in trading can also be recognized if some cryptocurrency is abruptly boosted on various forums/chats. Sometimes it is hard to know if this information is real or fake, but it is necessary to study this issue extremely carefully.
Large-scale pumping never begins simply for no reason. It is preceded by specific signals:
- Massive PR for a previously unknown cryptocurrency.
- Spreading the news that attracts attention.
- Creation of a frenzy around cryptocurrency by experienced traders. This is most often seen in forums and chats on certain cryptocurrency platforms.
Having tracked these signals, an experienced trader can predict the Pumps and manage to enter it with the beginning of the first wave (when Pumps or Pump groups start to buy cryptocurrency en masse). However, it is quite difficult to notice and react to these signals in time. You have to constantly monitor the market charts of many cryptocurrencies.
What are the main types of Pump
- Short-term - the value of the currency rises to unprecedented heights in seconds. This type of Pump requires a large number of traders. Usually the timer is set for the time when the trading pair for which the cryptocurrency will be bought will be announced. All Pump participants are informed of the planned % increase. As soon as the time comes to an end, the name of the currency you want to buy is posted on the public channel. Unscrupulous communities buy this currency in advance and place sales orders 50% higher than the planned growth percentage.
- Long-term is a Pump that lasts from a few minutes to a few days. Currencies and conditions are announced in advance. As a rule, really promising coins are chosen here. All participants also receive various news on the selected currency, which they publish in social networks, chat rooms, exchanges and other places where there are people interested in it. At the same time, there is a gradual process of buying the declared currency.
How to make money on Crypto Pump
1. Subscribe to Pump groups. Even if you don't plan to participate in Pump, you can just keep track of their news. Some groups report on site uploads days in advance, and that information can be used to make your own money.
2. Track your cryptocurrency pumping with the help of special monitoring services. For example, CoinData.
3. Use a special bot that keeps track of market rents. For example, YobitBot, CoinToolsBot and others.
4. Create pending orders. Some exchanges (e.g. Poloniex) allow you to create a pending order to sell cryptocurrency. If you are expecting a pump, try shorting orders at several times the current price. For example, if the current value of the cryptocurrency is $5, place a short order for $20 or $30. If the pump is really there, the order will work and bring you a profit. If there is no sharp jump in the rate during the expected period, just cancel the order. By the way, this is the safest way to earn on Pump. It is suitable for experienced traders who know how to analyze market trends and have free assets to place orders. The average net income of an ordinary investor from Pump is about 5%. Therefore, the more you invest, the more you can get.
In the world of traditional investments, such schemes are illegal. However, due to the lack of regulation in the field of cryptocurrency, they are very attractive in terms of quick and easy earnings. Opinions are divided into two groups: those who lost money call this scheme immoral and criminal, while those who belong to the group of manipulators or know how to use their activities usually say that this is a good way to clear the market of "stupid money" and attract investors.
In principle, such schemes are no more immoral than advertising gambling or lotteries on television - where there is money, there is always risk, and without careful analysis, patience, or at least good connections, there will be no profit. Read more about crypto with Finance Guider