How to spot a Pump and Dump before it happens in crypto?


How to spot a Pump and Dump before it happens in crypto?

The bitcoin market is particularly vulnerable to conventional pump-and-dump schemes. Thinly traded cryptocurrencies are excellent targets for fraudsters and other bad actors since many restrictions are ambiguous and complex for regulators to implement.

The critical question for those in the blockchain community is, “How do pump and dump strategies work?” This article delves further into the schemes to determine how they are implemented.

Who is behind crypto Pump and Dump?

Pump and dump operations are relatively easy to execute. These cryptocurrency scams often entail artificially increasing the price of a less popular token by disseminating fake news in an attempt to hype or “pump” it. Typically, a pump-and-dump cryptocurrency operation begins with an organizer assembling influencers in a closed online group. To avoid price jumps, they’ll coordinate the purchase of the target crypto asset (mainly Bitcoin). 

When the influencers are ready to pump the asset and persuade the broader public to buy in, they will post information about the deal with their social media followers. The organizers will then arrange the sale, for example, the dump, to ensure that everyone is paid, leaving the public investors holding the bag.

After that, call center operations, sometimes known as boiler rooms, contact potential private investors to persuade them to buy the stock by supplying misleading information suggesting that the stock is likely to enjoy significant increases. 

After a sufficient number of investors have been duped into acquiring the stock and the price has climbed sufficiently, the first set of investors will sell their shares to profit before the price falls, and all subsequent investors suffer significant losses. This form of securities scam has also spread to the cryptocurrency markets. Because of the uncontrolled nature of the cryptocurrency market, pump and dump scams are still alive and well.

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How to Spot a Pump and Dump?

The Overhype

Finding the asset is the first stage in executing a bitcoin pump and dump. Because the crypto asset is lightly traded, it is more likely to react favorably as volumes grow. These coins are more susceptible to market manipulation than ones with high or average trading volumes. It’s also a coin just released through an initial coin offering (ICO) (ICOs). 

It’s simpler to put a good spin on a new asset than it is on one with years of history. Many investors are looking for the next significant digital currency, so choosing a fresh “up-and-comer” makes the strategy easier to execute.

Once the target has been determined, malicious actors slowly purchase accessible coins. The idea is to gently build up a massive position, not spike the volume or tip-off others. This can be done over days or weeks to maintain the pricing consistent.

Pumping the coin

Now comes the pump. New strategies are being used due to the history of pump and dump scams and the capacity of investors to examine claims swiftly. Current fraudsters recommend that groups join in a pump and dump using Discord, Telegram, or other chat groups.

Once the pump has caused the token value to skyrocket, the initial pump group sells its digital currency in a synchronized operation, selling its token holdings to new, unsuspecting investors. This significant sell-off leads the token’s value to collapse, thus “dumping” the token price.

Sharp Dump

The pumpers then return with enormous gains, leaving others who were not part of the pump and dump gang with virtually worthless assets acquired at exorbitant prices.

The “wild west” of cryptocurrency pump and dumps has given rise to a few high-profile pumpers, like Ryan Pumper, a shockingly short pumper, and Fontas, a unique type of meta-pumper who uses their social media following to pseudo-pump altcoins. Errant cybersecurity consultant and crypto cowboy John McAfee is another well-known pumper who has been seen on camera cheerfully “shilling” or promoting shit coins.

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Avoiding Pump and Dump

It’s better to avoid the token if it’s been there for a long but development on the project appears to have stopped. These are all warning signs if the project has a defined objective, claims unrealistic advantages, lacks a well-thought-out development path, or is affiliated with prior bad actors.

Pump and dump schemes often limit currencies with shallow trading volumes and market capitalizations. Avoiding illiquid coins reduces your chances of falling prey to a pump and dump. 

Furthermore, refraining from following financial advice on social media or from sponsored news stories will keep you from incurring avoidable losses due to this form of market manipulation. You cannot be sure that crypto media groups have done any screening of the currencies they highlight, and these stories are frequently paid for.

What should you do to avoid these Pumps and Dumps?

Investing in cryptocurrency, like any other investment, carries risks. Hacking assaults, phishing schemes, malware infections, and other means might all lead to the theft of any cryptocurrency. Hackers may get access to accounts and withdraw cash using stolen credentials.

Trading bots can help you improve revenue while decreasing losses and risks. However, it might not be very comforting if used for other objectives, such as hacking cryptocurrency. These automated programs execute without human involvement. A bot may attempt to exploit flaws in an exchange’s software or hardware infrastructure. It might even execute denial-of-service attacks against a crypto exchange, causing trades to be disrupted and the money kept in hot wallets on the exchange to be compromised.


The study above enables you to peek into the head of a pump and dump scammer, allowing you to recognize them readily. Remember that you may profit from the mechanics by buying the coins of interest and selling them when the price reaches the top.

You might also think about studying more about bitcoin trading so you can grasp how different indicators function and readily spot abnormal movements. However, it is best to avoid the market during the pump and dump phase due to the significant danger of losing your money.

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