How to spot crypto pump and dump groups and signals?

How to spot crypto pump and dump groups and signals?

Best way to predict crypto pump and dump

Pump-and-dump (P&D) schemes are a sort of price manipulation in which the price of an asset is artificially boosted to sell it for a greater price after it has been obtained for a low price. When equity is dumped, its value declines fast, resulting in a loss for investors.

This article will discuss spotting the crypto pump and dump groups and signals and how it can affect the crypto market.

What makes the crypto pump and dump?

Supply and demand determine the value of any crypto coin when demand grows faster than supply, the price rises. 

A cryptocurrency’s supply is always known. Some, like Bitcoin, have a predetermined maximum supply. Others, like Ethereum, have no set production limit. Existing tokens are “burned” in certain cryptocurrencies to keep the circulating supply from getting too high and delaying inflation. Burning a token involves transferring it to an unrecoverable blockchain address.

Predicting a legitimate Crypto Pump and Dump

The first thing to understand is why a certain coin’s price grows. The more individuals who buy a coin, the higher the price may go if the number of buyers outnumbers the number of sellers.

Sometimes a buzz is developed around the surge, and the publicity generated will entice even more individuals to jump on board, particularly due to the fear of losing out (FOMO).

The greater the number of individuals aware of a currency and participate in it, the greater the volume of transactions, implying that more people are buying or selling the coin than previously.

After a cryptocurrency rises rapidly, it then falls steadily. Another cycle of this pattern occurs. There is a probability that a substantial increase is on the way, having a larger retreat. Still, this time you will be in for more gains.

A few successive climbs at a similar level are interpreted as a few attempts for the currency to break a new all-time high, or the upper resistance price, which a breach of this resistance might follow.

After each consecutive climb, there is a retreat, but this is natural because it is part of the coin’s consolidation phase. It cannot continue to increase indefinitely. Pullbacks must occur after each increase, as they are necessary for the coin’s stability. When dealing with cryptocurrencies, keep in mind that there is always a risk involved.

Crypto Pump and Dump scam scheme

A pump-and-dump scam is a sort of fraud in which the fraudsters accumulate a commodity over time. Artificially increase the price by spreading propaganda (pumping) before selling the commodity to unsuspecting customers at the higher price (dumping). Because the price was fraudulently raised, the price normally falls, leaving consumers who bought based on misleading information out of pocket.

The typical cryptocurrency pump-and-dump resulted in a 66% price increase in minutes, according to the research. A coin took an average of eight minutes to reach its peak price on volume, approximately 13.5 times the regular daily volume.

It’s hard to identify all of the market turmoil that impacts the cryptocurrency market. Still, there’s enough data to show that cryptocurrency does, to some extent, track global markets.

Systemic overleveraging enhances these pumps and adds to the volatility. Leveraging occurs when a trader borrows money from the exchange to boost investment possibilities. Instead of trading with $1,000 of your own money, certain exchanges historically permitted you to borrow up to 100x your original deposit, allowing you to trade with $100,000 potentially. Borrowing so much money, of course, poses significant liquidity concerns.

When a significant number of highly leveraged traders bet on bitcoin’s price rising in one direction, it opens the door for additional large investors (whales) to move bitcoin’s price in the opposite direction. This causes a chain reaction of liquidations, pushing the price of bitcoin into free collapse and resulting in massive paper losses for leveraged long traders.

How does the P&D scheme work?

Crypto pump-and-dump tactics take advantage of individuals while earning significant money for criminals. They can involve social media influencers who earn cash incentives to advise others to acquire a specific digital token to enhance its value. Once the value goes up, the fraudsters and influencers sell their coins and pocket the gains. At the same time, everyone else watches their investments lose value.

A few months ago, a group began selling coins based on the popular Netflix series Squid Game. The $SQUID coin had no links with the program or Netflix, but that didn’t stop people from jumping on the hype train, pushing the value from one cent to $2,800 and then free-falling back down to pennies minutes later. This resulted in the fraudster making $2 million while others who purchased the currency lost money.

These schemes reflect the latest twist in the ever-changing saga of cryptocurrencies, which have generated some riches while bankrupting others via their relentless volatility. With cryptocurrencies becoming simpler to generate, fraudsters are taking advantage of those who have developed FOMO, or “fear of missing out,” and are trying to jump on new crypto coins in hopes of getting rich.


This article sought to first look at research for bitcoin pump-and-dump techniques. A historical underpinning for the phenomena was detailed using literature from traditional economics and synthesized with currently accessible information on bitcoin P&D programs. 

We provided a set of defining criteria that could be used to characterize a crypto P&D and demonstrated how an anomaly detection approach might be used to detect patterns of suspicious behavior. Finally, it is hoped that the information offered in this work will be beneficial as a foundation for future research into identifying these fraudulent schemes.