Cryptocurrency exchanges News: The question of what is a pump dump has started to proliferate as the discussion of pump and dump about various coins has increased. We’ve prepared an article with everything you need to know about pump and dump in 2021.
What is a pump dump?
The question of what is a pump has actually been voiced for a long time. Although cryptocurrencies are new compared to other stocks and investment instruments, they can still be exposed to old-style illegal scenarios. One of them is pump and dump. First of all, it should be noted that pump and dump is an illegal action in regulated exchanges. However, this scheme still finds its place on unregulated exchanges. Because it is not so easy to follow such situations in unregulated exchanges. This leads to different situations that we will talk about shortly.
Pump and dump schemes in cryptocurrencies occur when an individual or group of people plans to make a profit by pumping a particular asset into the market. In order not to describe an unknown with another unknown, it is now necessary to explain the meaning of the term pumping.
Pumping is the name given to the purchase of large amounts of coins to raise the price and supply of a particular coin. Then, the pumper or group sells the related asset at a higher price to get a higher return. At the same time, market dynamics of supply and demand are exploited to enable investors to view price movements as a normal trend.
Are pump and dump illegal?
As we mentioned earlier, pump and dump are not legal on regulated exchanges. In cryptocurrencies, there is no restriction for pump and dump as most exchanges are unregulated.
How to recognize pump dump?
Recognizing pumps and dumps can be an important issue for investors and traders. Because sometimes, being noticed can create that thin line between gaining and losing. The following answers can be given to the question of what a pump is and how to recognize it:
• Be sure to thoroughly review the targeted coin before investing.
• When investing in cryptocurrencies, do not invest all of your cash in one coin. It’s good to keep your portfolio diverse. Because this method prevents you from losing all your money in case of any pump or dump.
• Do not approach with emotional feelings when investing in cryptocurrencies. A cryptocurrency may have been held too much at that time. But remember that there are many more of them. Therefore, there is no reason to get emotionally involved.
• Beware of coins backed by people and organizations you see as trustworthy and respected.
When you follow these steps, you are likely to notice anything wrong.
What is a pump? Can profit be made?
When detected early, you can take advantage of the pump and dump method. For this, you must first follow the market trends closely. You should buy when the price is going up, that is, pumping, and you should sell when the price reaches its peak, that is, when it is dumped. This is a situation that requires extra attention.
To explain step by step;
• Start following the coins that you have started to hear a lot about. This can be a new coin or an already existing coin. This scenario is common on Youtube, Telegram groups or Twitter in general. In fact, when you see a popular coin, you may even wonder why and do some research. In such cases, you are likely to have encountered a pump and dump event.
• Start following the coin’s price action. Try to notice when it starts to increase steadily. The moment you realize this situation, you can call it the pumping point. The pumping point is the point at which you need to get the coin in full.
• You have to follow the price closely in order to realize the peak point. Sell the coin as soon as you notice it. Its price may enter a sudden downtrend. For this reason, you should sell without waiting for the price to enter a downtrend. You may experience difficulties as the sudden decrease may occur faster than you expect.
Avoiding pumps and dumps in your investment
Investors, however tempting, should be wary of signs that a stock or cryptocurrency is about to rise. First of all, the source of the sign must be checked. In addition, it is useful to take a look at the articles written for warning, the videos taken or the slightest signs. Many pumping notifications come from people who shouldn’t be trusted. It will not be difficult to sense that something is wrong.
If an email, video, blog, post or newsletter only talks about the positives and doesn’t address the risks, a pump or dump is likely to occur. With traditional investments, you will always need to do your own research first. Of course, this also applies to cryptocurrencies.
But in cryptocurrencies, this situation works differently. In contrast to traditional investment, pump and dump
trading could open the door to high profits in the crypto world.
The most recent example is the tweets of Elon Musk that we encounter frequently in 2021 and the manipulations he created in the market. Especially with his tweets, Bitcoin and Dogecoin have also caused sudden fluctuations many times. Even the dog photo shared by his mother caused the dogecoin to pump in seconds.
As a result
We have come to the end of the article we compiled for the question of what is a pump. Pumps and dumps can turn into a heaven or a hell for investors. For this reason, it is useful to be careful. It is important that you do your own research, do not approach with emotional feelings, and always be on the alert.
Being able to notice the pump and dump event is a bit of an understanding of how cryptocurrency trading works. For this, you need to have knowledge of candle formations and charts. Also, technical analysis is another important topic to help you with such matters. In short, it would be correct to say that the way to notice abnormal trends is through technical analysis.
You may want to take advantage of the pump and dump situations for your investments. However, the probability of losing your investment may be quite high. For this reason, it is recommended to stay away from the focused coin during the pump and dump period