Hi Everyone,*
It's with great pleasure that I'm welcoming everyone to my blog and I hope you're all doing well and having a great day.
I'm here today to share with you all about vital informations regarding what pump and dump means in crypto space and what you need to do when such happens or when you find yourself in such situation.
Firstly, I will like to explain what pump and dump means in crypto space to have a best knowledge on to deal with the situation.
If you have been quite familiar with cryptocurrency then pump and dump won't be new to you but this article is to let those who are new to crypto space have more knowledge.
What is Pump?
In cryptocurrency trading, Pump can be referred to as the increase in the price of a digital asset, many a time at a swift pace.
What is Dump?
Dump in cryptocurrency can be referred to as selling off a substantial amount of cryptocurrency in a quick succession especially by the whale with the hope of acquiring great profit.
What is Pump and Dump?
Pump and Dump is an immoral and detrimental theoretical procedure, in which a group of investors come together to carry out two major actions.
The first major action is that a group of investors or manipulators generate feigned demand wave through buying huge amount of a specific cryptocurrency, usually low value coins with little market capitalization in tandem.
Buying a low value coins with little market capitalization in a large amount will leads to the price of that certain coin to skyrocket suddenly which in the process will attract attention and lure in other investors to invest in.
The next major action is that as soon as the price of the certain coin reached an expected amount, then the group of investors or manipulators will sell off all their coin unexpectedly which will later leads to a huge selling coercion that makes the price of the coin to crash.
When such happens, the investors or manipulators would have acquired a huge gains while pushing small investors to great losses. Pump and dump is an illegal act usually carried out by groups of investor with huge financial power to take charge of price as they think fit and be in control of cash flow. Even though, such behavior won't last but it usually caused a great loss and heart broken to small investors for a long time.
Some of the causes of pump can be looked in to the behavioral of the cryptocurrency whales whereby they will deliberately buy or accumulate a certain coin in a large volume and influence the price and there by attract retail investors to it. Liquidity is one the reason that cause pump and dump.
Fear of missing out (FOMO) is another causes of pump and dump as many investors is afraid of missing out on a certain coin thinking about they might lose a great opportunity if they don't participate in certain pump. This is the strategy usually adopted by the cryptocurrency whales to lure small investors in to pump and dump tragedy.
Procedure Of Pump and Dump
From the look of things, the pump and dump procedure is usually carried out in a three worldly-wise step by a large group of investors and those three steps are...
The first step is the accumulation, whereby whale or large group of investors begin to accumulate a low value coin in huge amount to create high demand for the certain time
The next step is that, after the whale must have accumulate the coin whereby the price of the certain coin must have skyrocket, then they will try to maintain the price and begin to campaign for other investors to invest in so that the price will go up and attract more investors.
Then the last step is the bitter experience you don't want to go through. When the whale must have reached a desired price range, then they will sell off all their holding creating selling pressure in which the price will crash and at that point, small investors will be pushed to great loss why the whales or large group investors must have acquired a great profit.
Pump and Dump act in cryptocurrency market is something that will be happening time to time and that's why you have to be careful because investing in crypto is very risky. Don't just fall for sudden price hiking of certain coin you don't really know much about, but instead doing the due diligence can save you from falling in to such illegal and bad act when you do your own research and gather vital informations.
And moreso don't put all your eggs in one basket. Avoid investing all your capital in a project you're not really familiar with and don't let a certain rewards push you to trap. Make sure to diversify your investment and avoid buying coin from illegal trading apps.
That's all for today and I hope you find this article educative and useful.
Thanks for visiting my blog and have a wonderful day
I really appreciate your upvote and support
@twicejoy cares ❤️❤️❤️