Pump and Dump

Pump and dump is a fraudulent scheme commonly seen in financial markets, including the cryptocurrency space, where the price of an asset is artificially inflated, or "pumped," through the spread of false or misleading information. Once the price reaches a certain level, the perpetrators sell off, or "dump," their holdings at the inflated price, leaving other investors with significant losses when the price inevitably crashes. These schemes are typically orchestrated by groups that coordinate buying activity to create a false sense of demand, which attracts unsuspecting investors who are unaware of the manipulation.

The rapid price increase during the pump phase is often driven by coordinated efforts to generate hype, such as through social media campaigns, online forums, or misleading news articles. As more investors buy into the asset, believing they are riding a legitimate upward trend, the price continues to rise. However, once the orchestrators begin to sell off their holdings, the market quickly realizes that the demand was artificially created, leading to a sharp drop in price. Investors who bought in at the peak are left with assets that are worth significantly less than they paid, often resulting in substantial financial losses.