The term “Dump” (from the English dump - decline, rollback, drain) in the world of cryptocurrencies did not appear from scratch - it is actively used on traditional fiat currency exchanges. Bitcoin dump is a deliberate and artificial reduction in the value of BTC to the level desired by the trader with the subsequent purchase of this currency at a very low price. Do not confuse it with the concept of “Bitcoin Core block dump”, this is a term from the field of cryptocurrency mining.
We have previously discussed the features of trading Bitcoin on. In general, the dump trading strategy is very similar, but there are slight differences.
How to sell Bitcoin dump - nuances of trading
In this case, we mean tips on how traders can trade on a Bitcoin dump. This should not be confused with fraudulent schemes for resale of Bitcoin Core on a dump. The fact is that on the Internet you can see many advertisements with offers like “How to sell a Bitcoin dump on favorable terms” or, conversely, with offers to buy blocks from a dump. It is understood that users can not mine, but buy mined ones (on the Bitcoin Core network).
Of course, you shouldn’t expect that such sites will actually tell you and show you how to sell a Bitcoin Core block dump. More likely, you will simply be scammed out of money. There is simply no easy money in any area related to making money on Bitcoins and cryptocurrencies.
Let's give a simple example of how to trade on a Bitcoin price dump. Imagine that you own a large amount of BTC and start selling coins sharply. Because of your actions, the cryptocurrency market is quite sharply replenished with a large number of coins, which is why they rapidly begin to fall in price. When the rate drops to the required level, you buy the crypt again and thus make money on the difference in rates. That's all the wisdom, nothing complicated at first glance, especially in theory.
However, in practice, influencing the BTC rate from scratch is not so easy. To change the price, you will need to perform several sequential actions. Typically, Bitcoin dumpers play the market with careful planning and preparation.
Preparing for a Bitcoin dump
First, a trader or group of traders (dumpers or insiders) select a coin that will be subject to pumps and dumps. Most often, the choice falls on coins not so well known as Bitcoin, but, for example, Bitcoin Cash. But if there are a lot of such dumpers, then the Bitcoin rate can collapse. After choosing a currency, without haste, they consistently begin to buy it so as not to attract attention to themselves.
Depending on the scale of the undertaking, procurement can last from a couple of hours to several months. The moment of purchase is very important, because dumpers need to remain in the shadows and significantly influence the price increase. At the slightest suspicion, exchange holders or traders themselves can start selling coins in order to buy them again later.
How does an artificial hype dump happen?
At the final stage of coin accumulation, dumpers begin the second phase of their “strategy” and, through concerted actions, raise the value of the currency until it stops at the level they need. After this, active advertising of the coin begins. There are many platforms for PR: forums, YouTube, Telegram channels, news on social networks, mailing lists, etc. Coordination of dump communities most often occurs through Telegram channels.
Members of the united group on Telegram work together and discuss among themselves exactly when and on which service the crypt dump will occur. Which coin will be dumped is announced only at the very end of the discussion. Next, participants in the process begin to actively buy coins on . The excitement around the coin is growing, which affects the rise in its price.
Sometimes the phenomenon of “Bitcoin site dumps” occurs when many traders collapse exchanges due to a large number of simultaneous orders (orders) to buy BTC. By the way, reputable exchange services play it safe and set time limits for the purchase of a specific currency.
At the peak of the hype, there is usually a pullback. At this moment, dumpers again begin to actively pursue an advertising policy, encouraging new participants to buy coins. The campaign is mainly aimed at market newcomers who are ready to believe that the hype is not artificially caused.
Dumpers artificially set limits (so-called “walls”) on the sale and purchase of BTC in order to stabilize the rate if necessary and keep it within the limits they need. During the process, the “walls” are set to the required levels depending on the price position. Sometimes this is done manually, but more often with the help of programmed bots.
“Walls” are ordinary applications (orders) for huge volumes of cryptocurrency, which prevent the price from rising or falling beyond the required level. “Walls” are a kind of “rudder” for turning the course in one direction or another.
In some cases, the pump is carried out very persistently and on the chart it appears as one large green candle, which instantly turns into a dump without subsequent waves of growth. As a rule, there is no point in purchasing at the peak of the candle. In this case, dumpers justify themselves by saying that the Bitcoin exchange rate was too unstable or there were problems on the exchange website.
Bitcoin sale after initial price increase
As the value increases, traders and investors buy up coins before they increase in price even more. This is where the “finest hour” of dumpers comes. In seng this stage is called cutting the “hamsters”.
“Hamsters” are novice traders in the jargon of dumpers who are driven by the created hype and buy coins when the price reaches a high level. After that, they sell the purchased coins at a loss. Dumpers at this time begin to dump their coins on the “warmed up” market. This is done gradually and carefully so as not to arouse suspicion. Sometimes they even buy them from each other in order to mislead other traders and divert suspicion from themselves.
A sharp collapse in value and completion of the dump
Ultimately, when currency reserves are drained, dumpers leave the sites and stop stirring up interest and influencing the price. Here comes the dump moment. Unsuspecting, duped players begin to sell off their assets. But there will be no more demand for them.
Each dump is marked by a sharp rise and fall in price. The price of the coin is sure to collapse. Traders need to either sell coins at a loss or store them until better times. By the way, the second option is much more reasonable in the situation with Bitcoin. Obviously, in the future Bitcoin will be dumped again, and then there will be a chance to get rid of coins at a favorable price.
How to avoid getting caught in a Bitcoin dump?
Beginner BTC traders need to be as vigilant as possible. First of all, you need to actively follow the news on specialized sites. A pump and subsequent dump can be calculated using several criteria:
- If there are no positive forecasts on the site about the growth of the coin, but an abrupt increase in its rate still occurs.
- Lack of sudden growth of the coin rate on other exchanges.
- Active discussion of a particular coin in the exchange chat by different participants signals that dumpers have become more active.
How to behave if you find yourself in a Bitcoin pump and dump situation?
If you managed to identify the Bitcoin pump and dump already in its later stages, but the purchase of coins has already been completed, do not be afraid to proceed with an instant sale with small losses. If you delay the decision, the losses can be significant. There is still time to get rid of coins during this period, so that later you can buy them again at the lowest price. You can sell Bitcoin profitably after the first two stages of the dump, and even at its last stage. But don’t delay for too long, because the second rise is almost immediately followed by a price rollback.
You should not trust everything you read on forums and social networks. In most cases, such sites serve as a breeding ground for barkers. Check information from reliable sources (official websites and news feeds of exchanges).
How legal is Bitcoin pump and dump?
If you watched the movie “The Wolf of Wall Street”, then the principle of pump and dump operation was probably not a revelation to you. For the usual exchange environment, in which shares and fiat currency are involved, such a process is unacceptable. Fraudsters must be punished for such actions.
However, the cryptocurrency market is completely decentralized and essentially does not belong to anyone, which means it is not subject to the usual legal norms. Therefore, pumping and dumping can be considered completely legal, even if they cause significant damage to other users. At least this is the situation at the moment.
The Business Insider portal recently conducted a major investigation of the leading cryptocurrency exchange Bittrex. The administration of the service even had to send out letters to all its users warning that their site would block accounts caught in fraudulent schemes.
Should we trust insider leaks about a Bitcoin dump?
Due to the increasing number of cases of cryptocurrency dumps, a lot of insiders have appeared on the network who supposedly offer users “reliable” information about upcoming pumps and dumps for free. There are also quite honest analysts who ask for at least half a Bitcoin for their information. Considering the risks, is it worth using such services?
It is important to remember that almost 90% of such “insiders” are scammers. Their goal is to throw dust in your eyes and get easy money. They will provide information that you want to hear, but most often it will have nothing to do with reality. With just five gullible traders, such “insiders” can earn up to $2,000 from scratch. Not a bad scheme for scammers, given that there are no costs or risks for them, since such “scams” are not punishable by law.
At the moment, Bitcoin pumps and dumps are not such a frequent occurrence, and if they do occur, they occur at short intervals. This is due to the need for large investments or the organization of a large number of participants. Usually, inexpensive currencies with a small trading volume are dumped - then it is easier to influence the price.
In any unclear situation, always keep in mind the old but true saying of traders - buy rumors, sell news.
More about Bitcoin dump:
You can understand the pump and dump phenomena in more detail by watching the following video:
- Read more about.
A cryptocurrency pump is the creation of artificial demand for an asset through its mass purchase by a limited group of people (pump group) for the purpose of subsequent sale at a higher rate to “hamsters”.
“Hamsters” are newcomers to the exchange, network participants who buy a crypto asset for the future when they see that it has begun to grow. Needless to say, when a pump group begins to sell the purchased coin at an inflated price, it is the “hamsters” who become victims of this scheme with the depreciated crypt in their hands.
What is a cryptocurrency pump and how does it happen?
To understand the essence of a cryptocurrency pump in more detail, let’s consider the algorithm by which it is implemented. In general, it can be divided into 4 large stages:
- Selecting an asset, planning and attracting investors. Typically a pump group consists of permanent members. They create a private chat in Telegram, another messenger or social network. The creators of such groups from time to time select an asset to carry out a pump or choose an altcoin from those proposed by group members. By what principle they prefer one coin or another, we will talk further below. The optimal time is also selected, the purchase period is indicated, and tasks are given and distributed among group members to raise “buzz” around the selected cryptocurrency on specialized forums, social networks, and media resources. After the terms of the pump have been discussed and agreed upon, the second stage begins.
- Purchase. They buy the selected asset gradually and quietly. This period is one of the most responsible and important; it can last up to several months. Investors should place orders quietly to avoid triggering uncontrollable large-scale growth.
- Advertising, hype, making a fuss around. As soon as all investor funds are invested in the purchase, the next phase of the cryptocurrency pump begins - active advertising. In part, the news feeds for growth are thought out and launched in advance, so that when growth begins, traders can find confirmation of the reasons for the growth in the news. Naturally, this is fake information. Members of the pump group actively stir up interest in the coin, advertise it in chats on exchanges, prophesying a great future for it and rapid explosive growth, post fake news about the asset on specialized forums, websites, and chats, and artificially set up walls for purchases on exchanges. In general, they are doing everything possible to provoke a stir among potential investors who should believe in the future growth of the coin. At this stage, usually the value of the asset grows significantly and here it is important for the pump group participant not to miscalculate the peak moment. The price during this time may increase by 10–30, or even 50–100%.
- Selling coins. At the peak of value, the participants of the pump group sell their coins at one moment, which is pre-agreed and chosen, thereby provoking a large-scale and rapid drop in the rate. The result of a pump is always a dump.
In case of a dump, traders also use the phrase “hamster haircut.” We have already figured out that “hamsters” are the main victims of the cryptocurrency pump. But the word “haircut” is used here in the sense that more experienced crypto traders make profits from beginners who do not understand the basic market principles and rules, and therefore trade at a loss.
Types and examples of cryptocurrency pumps
We looked at the essence of a cryptocurrency pump - what it is, on what principle it occurs and what phases it has, and in addition, we became familiar with the basic terminology relating to this issue. Now, let's talk more specifically about the types of pumps and, in order not to be unfounded, we will give examples with graphs.
Short term pump
This type of pump takes only a few minutes, maximum - up to half an hour. It is unlikely that you will be able to “attach” to the scheme and make money on it, so it is better to avoid such manipulations in the market.
As an example of a short-term pump, you can consider the situation with the Bytecent coin (BYC) on Bittrex:
Long-term pump
This type of pump can take several hours, and sometimes more than a day. You can clearly understand the difference with a short-term pump from the Nextcoin chart:
Except for the duration of the pumps, they are no different and always follow the same pattern. There is a plus in this: by understanding the general principles of the cryptocurrency pump, you can quickly recognize it and not become a “haircut hamster.”
How to recognize a cryptocurrency pump and protect yourself from it?
Despite the fact that cryptocurrencies themselves are volatile, it is not difficult to understand when an asset is growing on its own or as a result of a pump. To do this, you should pay attention to several points:
- If you see sharp activity on the exchange with an inexpensive, new coin, then first of all pay attention to the news around it. To do this, you can even use a regular search engine (enter the name of the crypt in the news tab in Yandex). There is usually less news about little-known new assets than about TOP coins. If there has been growth on the stock exchange, but there have been no positive, serious news over the past few days, then this is the first “bell” that we are dealing with a cryptocurrency pump. But don't rush to conclusions. Let's check a couple more points.
- If there is a lot of spam in the chat on the exchange from different participants, especially beginners, that you need to buy the coin that has started to grow. If it is alleged that insiders have been leaked and there is “hype” around the asset, then rest assured, this is most likely a pump. Don't be fooled by sweet stories and promises of profit. They are designed to confuse you and force you to make an impulsive decision to invest in a known failure.
- A sharp jump in the growth of cryptocurrency, if it is due to real reasons and not caused artificially, should be observed on different exchanges. Pump groups usually attack one area. Previously, pumps were often carried out on bittrex.com, but after the service’s management tightened its policy towards pumpers, many of them moved to yobit.net. YoBit even uses special bots to optimize pump speed. However, such manipulation can be carried out on any platform. Your task: look at the situation with this currency pair on other exchanges. If there is no growth, in most cases it is definitely a pump.
What to do if you become a victim of a cryptocurrency pump?
In some cases, the user knows about cryptocurrency pumping: what it is, how it happens, but makes a mistake and buys on the wave of “hype” without having time to check the information.
The first and most important rule is don't panic. It is possible to minimize losses, you need to know how to do it, and we will figure it out.
Here is an example of a cryptocurrency pump:
For example, you bought an asset after passing point 1. In this case, you can detect a pump in 2 positions: point 2 or 3.
- If you realize that you hit a pump at point 2, then do not be afraid of a minimal loss and sell the asset as soon as possible. This way, your losses will be comparatively smaller and you will be able to recoup them. For example, rebuy the same asset at point 3 and resell at point 4. Usually, a pump is followed by a short, small burst of growth.
- If you recognize an asset at point 3, do not rush to sell it. Wait for this small growth spurt and sell quickly. After the second dump, the asset will not reach such a high value soon.
- If you became a victim of a pump and realized this after passing point 4, this is of course the worst outcome, on the one hand. But on the other hand, do not rush to sell a depreciated asset, constantly monitor the situation on the market. Perhaps they will soon start pumping it again or it will increase in price for other reasons. Let it be in your investment portfolio for the future. Still, this is a better solution than selling it for pennies.
- Read also about.
How to pump cryptocurrency or make money on someone else’s?
You can pump cryptocurrency in 2 ways - gather your own pump group or join someone else’s. Both options have their own subtleties and risks, but both can be profitable if done correctly.
Creating a pump group
If you decide to create your own community, then you will have to spend a lot of time searching and attracting investors. This is easier for bloggers, owners of YouTube channels or other specialized resources in crypto topics. If you are not one of them, then you have several ways out of the situation:
- Order advertising from bloggers or on specialized resources. Yes, it will cost money, but it will attract considerable investment.
- Participate in discussions on crypto forums, earn karma or rating there, and then offer interested traders joint investment within the pump group. You can look for like-minded people and investors in crypto communities and chat rooms on exchanges.
- Involve your friends and start word of mouth. Only the deaf-blind don’t know that you can make money on cryptocurrencies. Perhaps your relatives, colleagues, friends will be interested in investing in the project with you and making money on the pump.
- Large investments. A large-scale pump may require an injection of several thousand, or even tens of thousands of dollars. It is unlikely that an ordinary user can afford such an investment.
- Regulation by exchanges. You need to create buy and sell orders from different accounts. Large transactions from the first profile may be blocked, and switching between fake pages in a short time will be difficult and almost impossible (not to mention that they are difficult to register and verify).
- Cryptocurrency should be inexpensive and have low trading volume. Why isn't anyone doing it? Because it is the most popular and expensive coin. In order to even slightly influence the trading volume and price, investments amounting to millions of dollars are needed and, of course, only the “whales” can do this, and even then not everyone. The lower the price of an asset, the lower the trading volume, the easier it is to pump it. The cost and trading volume are not always directly proportional. For example, the price of the XRP token at the time of preparation of the material was $0.4567, and the trading volume was $11 million. But Litecoin costs 51.78 USD, but the trading volume barely reaches 4.5 million. For a pump, it is important that both indicators be minimal.
- The cryptocurrency must be new. This is not entirely necessary, but it can make pump preparation much easier. Firstly, it is easier to create excitement around a new asset by inventing “legends”. Secondly, it is new coins that most often have a minimum price and trading volume, and this is an important condition.
- The rate must be stable. It is advisable that a minimum number of traders be interested in the coin before the pump. There should be no surges for a long time before the pump. This is important so that only members of the pump group can influence the course.
- Prepare fake news feeds to explain the reasons for the asset’s growth.
- Purchase a coin within a certain period of time.
- Start actively advertising cryptocurrency, creating a stir on forums, chats and websites.
- Sell an asset at its peak value at a predetermined moment.
Participation in other people's pump groups
If you don’t want to attract investors yourself, you can join an existing crypto community that is engaged in pumping. Finding them is not difficult - they usually conduct all negotiations about their future plans in a closed Telegram chat. From time to time, such groups attract new investors by placing advertisements on specialized platforms.
The main criterion when choosing a group for a cryptocurrency pump is reviews. You can find them on forums about almost any community. The creators of such groups are not always honest and can sometimes start selling assets before the rest of the group members start doing so. Thus, other investors also remain slightly “cut off”. For this reason, it is better to work with reliable and long-established communities.
There is one more piece of advice: start with small amounts when first collaborating in a pump group. Even if you can buy more coins, don’t do it, even if the first few pumps will not be so profitable, but you won’t lose yours.
Earn money on the pump yourself
If you do not create your own pump group or are not a member of any of the communities, this does not mean that you cannot make money from it. If you carefully study the cryptocurrency pumping charts, understand what it is and be able to recognize them, you will be able to “cut the hamsters” yourself. The main thing is to enter as early as possible, when it becomes clear that a pump is being prepared, and sell at the peak. Some users make money from a cryptocurrency pump twice - at the first peak and before the second dump.
You can know about the impending pump and dump of cryptocurrencies based on personal observations of the charts of new, cheap assets. In addition, there are many Telegram channels where pump schedules are posted.
Cryptocurrency pump - is it legal or not?
Many have already understood what it means to pump into cryptocurrency and why it can be very profitable with the right approach. But can such “earnings” be called white and legal?
If in a normal exchange environment this is considered fraudulent manipulation, then with cryptocurrencies the situation is somewhat different, since they are decentralized. There is no legal framework for the circulation of crypto assets, and therefore it is almost impossible to recognize a pump in cryptocurrency as illegal.
However, of course, such manipulations could not go unnoticed by the management of exchange platforms, which is why they are actively fighting pumpers. For example, Bittrex blocks the accounts of those it suspects of carrying out pumps and dumps. Yobit blocks bots that overload the system.
Conclusions about cryptocurrency pumping
The network has already called 2018 the year of the pump and dump epidemic. Against the backdrop of a deep correction, there is no need to talk about storing crypto for the future. Traders make money by opening short-term positions. In the first half of 2018 alone, according to Wall Street Journal research, 175 cases of pumps were recorded on 121 cryptocurrencies. In the second half of the year the situation did not change.
You can have different attitudes towards pumps and pumping in general - consider it a scam, turn a blind eye to it, or actively participate in it. However, the fact remains that the “haircut of hamsters” continues and, apparently, will not end soon.
Video about pumping:
Money makes money - this expression perfectly suits the phenomenon described in the article. It is present in any market, but in the cryptocurrency market, pumpers are especially active in clipping hamsters. We will analyze what a pump and dump of cryptocurrencies is, how to recognize the first signs of pumps, who carries them out and for what purpose.
“We will help you make money, join us!” - today the Internet is replete with advertisements for Telegram groups or chats that are actively involved in pumping cryptocurrencies. Some of them have thousands of participants who are looking forward to quick and easy enrichment. If you go inside, you can often find messages here: “Let’s go higher, the price is far from the maximum!”, “We are increasing volumes, we are working!”, “We are throwing bots into the work!” etc.
The most popular channels in the English-speaking environment are PumpKing Community, Pump Notifier/Trading Signals, Crypto4Pumps, We Pump and others. Their organizers sometimes involve tens of thousands of participants when conducting their pumps. Often, lovers of easy money are lured into private chats with paid access, in which they promise to share profitable signals.
So what kind of beast is this pump and dump?
It's simple. A cryptocurrency pump is a coordinated action aimed at maximizing the price of a token. And then at the peak, when the token is actively bought by third-party buyers attracted by the hype and rapid rise in price, pumpers sell their coins and make money from it. As a result, after the pump there is an inevitable dump. A cryptocurrency dump is a sharp drop in price to the previous level, and sometimes even lower.
Since the cost is artificially inflated, the scheme is clearly fraudulent. It is considered illegal on traditional exchanges. In cryptocurrencies, where the situation is currently practically uncontrolled by regulators, the situation is worse.
A pump can be carried out either by one person who has sufficient capital for this, or by a group of players who do it in concert with each other. Cool coins with huge capitalization, for example, BTC, Ether, Monero, are rarely pumped today; this would require huge funds.
It’s easier to overclock cheap tokens like Nextcoin, Magi Coin, Bytecent, VCash and others like that. To do this, they most often guess the time when some current news on the selected cryptocurrency should appear. This could be a website update, a new version of the wallet, an improvement in the operating algorithm, etc. This way the pump will look more believable.
The main goal of the pump is to attract hamsters and sell them the required amount of cryptocurrency at an inflated cost.
Stages of a Pump and Dump circuit
It is impossible to increase the price from scratch. The process itself follows a preliminary stage. Let's look at how to pump cryptocurrency one by one.
Planning and accumulation
First, the organizers, or as they are also called, insiders, determine the coin that will be pumped on the exchange. Then they begin to buy it gradually and carefully so as not to arouse suspicion. The procurement can last days, weeks or even months. Pumpers at this stage try not to burn up the volumes being collected and not to influence the price increase. At the slightest sign, they may even sell some of the coins and buy them back later. Thus, a large number of tokens are accumulated in one hand.
Active advertising
As soon as the accumulation stage comes to an end, a concerted effort begins to drive the price up and, as soon as it reaches the desired limit, actively advertise the token. For this purpose, different platforms are used: forums, spam mailings, telegram channels. It is through the latter that pumps in the cryptocurrency market are most often coordinated.
As a rule, channel participants are told in advance what time and on what exchange the pump will occur. The coin is announced at the last moment. After which everyone who wants to take part in the pump begins to actively buy it. The value of the token continues to rise in the wake of the hype.
In the middle of the wave, as a rule, but not always, a small pullback begins. At this time, pumpers continue to disperse the excitement, attracting participants from outside. There is no question that this is a pump. The token is actively praised on forums, chats, and troll boxes. They talk about how undervalued it was, what great prospects the coin has in the future. The calculation is carried out mainly on users who are poorly educated in the exchange business and who are afraid of missing out on a chance.
During the process, pumpers set up walls for buying and selling tokens in order to keep the rate within the required limits. They are constantly rearranged to the required levels either manually or with the help of bots.
Walls are nothing more than orders with huge volumes that prevent the price from rising above or falling below a certain limit. With their help, they turn the course in the right direction.
Sometimes a pump immediately looks like one huge green candle, which immediately ends in a dump without a new wave of growth. As a rule, it’s already too late to buy on such a candle. Pumpers on the channels justify this development of the situation with third-party events: either the Bitcoin exchange rate is to blame for them, or problems on the stock exchange.
Sale
Attracted by the hype, investors and traders are rushing to buy the cryptocurrency before it, in their opinion, has completely risen in price. This is where the golden time of pumps comes. As it is also called - hamster grooming time.
Hamsters in exchange jargon are inexperienced traders who are caught up in the hype and buy tokens at highs (high price), when the price is maximum, for fear of missing out. And then they sell it - at a loss.
The organizers of the event begin to sell off, or, in other words, drain, their coins on the overheated market. In order not to arouse suspicion and not to collapse the price of the token prematurely until they receive the desired profit, they do this gradually and carefully. Sometimes they even start buying in order to support newcomers’ faith in a further medium-term price increase.
Collapse
Eventually, when supplies are mostly sold out, pumps no longer drive interest or the value of the token. This is where the dump comes in. Players, unaware that they have become victims of a pump and dump scam, are confused and trying to sell their assets. However, no one is interested in them anymore.
Any pump ends with a large-scale drain. The price is actively rushing down. Traders sell tokens either at a loss or are left with a bunch of coins waiting for the time when they rise in price again. The second option, by the way, is much better, since the likelihood that the token will soon be pumped again is high. By the way, the pumpers themselves advise this on their channels.
Types of pumps
There are long and short pumps. The first ones can last a day or more. The second - from a few minutes to half an hour. And if you can still try to make money on the former, then it is better not to mess with the latter at all, but to save your nerves.
Short pump charts most often represent two candles - the first green one for takeoff and immediately followed by a similar one for drainage, where a simply ignorant person does not have time to either enter properly at a normal price or exit.
In long pumps, in addition to explosive growth spurts, corrections are also observed. Experienced traders who have a good understanding of the market can make money in such situations. However, it is worth considering that since the price is artificially inflated, many chart analysis tools simply will not work here.
How to find out when there will be a cryptocurrency pump
Many people are interested in how to recognize a pump and dump and not fall for the bait or, on the contrary, make money from it. The classic pump scheme most often looks like this.
As you can see, at the first stage the pump slowly gains position. The cost of cryptocurrency, if it fluctuates, is very little. Then, at the second stage, the token is actively advertised, and the price rushes up on a wave of interest. As a result, the manipulator sells off its reserves, and the price, which is not supported by anyone, flies rapidly down.
Pump on the cryptocurrency exchange - examples
For clarity, here are a couple of examples of graphs that show the cryptocurrency pump process. We won’t go far and take Bittrex.
In this example, they pumped the Bytecent coin (BYC). Here you can clearly see the process of gaining a position, then a sharp takeoff and, without any adjustments, an equally dizzying loss. This is the so-called short pump.
In this example, pumpers accelerated the price of Nextcoin. Here the process has already stretched out over a longer period of time.
What about exchanges?
Cryptocurrency exchanges are now starting to actively combat this fraud scheme on their own. The first platform to take steps in this direction was Bittrex. And not without reason. This is the exchange that pumpers have chosen the most.
At the end of November last year, the exchange sent out warnings to users that they would block accounts for participating in pump and dump schemes. In addition, applications that were more than 28 days old were deleted. The minimum placement amount was raised from 50 thousand satoshi to 100 thousand.
Summarizing…
Whether or not to participate in the pump is everyone’s business. The main thing to remember is that during pumps, profits are made primarily only by pumpers who are in control of the situation. Moreover, they are not always in the planned volume. What can we say about ordinary traders who are only trying to predict the development of events.
They may tell you when the pump starts, but when it ends, you are unlikely to know. And considering that the active phase of the pump in many cases lasts several minutes, few people manage to independently predict when the drain will begin. It depends on your luck.
As for the channels that send signals to the pumps, they should be selected with great care. Before you start trusting pumps, watch from the outside how the situation develops. On forums they often complain that the administrators of such channels give a signal to buy, but by this time the coin turns out to be pumped almost to the maximum and no matter how quickly they try to buy it, it is impossible to do this profitably. Traders simply remain in the red.
Before you decide to invest money, find out as much as possible about this token, study the charts, and research the market. When there is no time for this, it is better not to rush headlong. If it happens that you bought coins but didn’t have time to sell them profitably, wait for the next pump.
The pumpers themselves do not find anything reprehensible in their actions and assure that manipulation is present in all markets and in all spheres of life.
This article is for those who, having discovered cryptocurrencies, decided not to buy coins based on long-term growth in the exchange rate, but chose to trade on exchanges. The opportunity to buy and sell crypto, making quick money on the difference in rates, now attracts many. But it also poses many dangers for inexperienced traders. One of these dangers is stock manipulators, or, as they are sometimes called, “pumpers.”
Getting ready to push the price up
- Pump(from the English pump - to inflate, pump up) - mass purchase of cryptocurrency by manipulators with the aim of artificially increasing demand and subsequent increase in the rate.
- Dump(from the English dump - dump, overturn, arrange dumping) - a quick sale of cryptocurrency after a speculative increase in its value. A dump always follows a pump, and manipulators thus make money from gullible traders who bought coins at an artificially high price.
- Hamsters– those same inexperienced, gullible traders and beginners who are actively involved in the market game even in the later stages of the pump. Not seeing the true reasons for the growth of cryptocurrency, they consider it natural and buy coins at an inflated price.
Grooming hamsters or just a haircut - taking money from novice traders with manipulators.
So pump + dump = hamster haircut.
How the pump is organized
The cryptocurrency market, unlike others, is still too young and subject to speculation, and reacts sharply to news. Therefore, the price of cryptocurrencies can be artificially high or low by unscrupulous market participants. However, very large sums are required to manipulate prices. This is why ordinary traders are so afraid of “whales” – owners of large cryptocurrency fortunes. Whales are able to quickly bring down the price of cryptocurrency by selling even part of their assets.
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Arranging a pump-dump combination alone is beyond the power of any ordinary trader. That is why a pump is a carefully planned and prepared action in which thousands and tens of thousands of exchange players participate, willingly or unwillingly. The greater the volume of a cryptocurrency pair for buying and selling, the more difficult it is to arrange a pump, which is why this “strategy” is most often used with cheap altcoins.
Pump of one of the cheap coins on Bittrex
This is what price manipulation looks like using the example of a five-minute chart from the Bittrex exchange. Until 9.30 there were no signs of trouble and the altcoin was trading as usual. Then, within half an hour, the rate was doubled, followed by a sharp drop in price. And then the situation repeated itself again with greater amplitude, as hamsters actively became involved in trading.
Pump starts on signal
Before starting the pump, manipulators prepare for it. The first step is an information attack - messages on various forums, in groups on social networks, instant messengers and all other available communication channels. The main message is to convince traders that the cryptocurrency rate is expected to rise. If there is any favorable reason from official sources (news on the website or on Twitter of crypto developers), this is always reported. If there is no worthy news feed, the information can be presented as insider information. But most often they simply write about an increase in value in the near future. Since the attack is aimed at a specific exchange, the messages always say when, where and what cryptocurrency needs to be bought. Most often, the Telegram messenger is used to disseminate such deliberately false information. Encrypting messages gives attackers additional security.
The second stage is direct work on the stock exchange. When a large number of users believe in the growth of the rate, manipulators additionally place “walls” for purchases so that the rate at least does not fall. It can also create the appearance of active trading using bots - fake orders for large amounts that are constantly changed, canceled and re-issued. These actions lead to an increase in the rate. Traders who came on a tip from speculators see that the rate is really growing and begin to actively buy crypto, thereby provoking an even greater increase in its value.
At the peak of the first wave of price growth, pumpers are actively selling cryptocurrency. It is important for them to have time to sell the coins at a time when they are guaranteed to be bought even at a high price. This causes a sharp correction in the rate, and inexperienced traders begin to panic. Those who bought coins at a high price try to get rid of them as quickly as possible and record losses. The exchange rate continues to fall rapidly.
Traders panic and make rash decisions
But it usually doesn't end there. When the rate falls sufficiently, manipulators buy large volumes of crypto and push it up again. Inexperienced traders use emotions to try to compensate for initial losses in the second wave of growth, and end up losing even more. The second wave is usually even more active and prolonged in its dynamics than the first. Taking advantage of panic in the market, pumpers force hamsters to buy crypto at the peak of its value, and then sell at a low price when they fear an even greater drawdown in the rate.
Depending on the behavior of the bulk of traders and how effectively such “swings” work, there can be three or more pump-dump waves. As a result, the hamsters are successfully sheared, and they are left with significant losses - both financial and nervous.
Hamsters have haircuts, some are even shaved
At this time, at the peak of the next wave, manipulators finally drain the cryptocurrency. There are situations when, after all the fluctuations, its final rate turns out to be even less than the initial one.
Usually the entire “special operation” takes several hours, as a result of which pumpers receive quick money - up to 10-20% of their (usually already considerable) initial amount. It's time to hide, and after a while repeat the same machinations, but on a different exchange. Or with another coin. Or with other hamsters...
I am a pumper. And I'll take all your cryptocurrency!
How to protect yourself from diapers?
When trading on the stock exchange, be careful and extremely attentive. Follow the news. You can track the pump in time by a number of signs:
- If, in the absence of positive news, the rate increases abruptly, sharp exchange activity appears (many large buy/sell orders, numerous “buy walls”).
- If there is no sharp increase in the rate on other exchanges with the same traded pair, in 99% of cases this is a pump.
- If in the exchange chat there are constant calls from different participants to buy this or that coin, information about growth prospects or “leaked insider”. If you are not confident in your actions and easily give in to persuasion, it is better to turn off the chat altogether.
Some useful tips for pumping
When you identified the pump too late and bought a cryptocurrency at the peak (on the chart - after passing point 1), and then the rate went down sharply - do not be afraid to take a small loss and sell (point 2). If you wait, your losses could be much greater. Therefore, it makes sense to sell as quickly as possible and then repurchase at the lowest price (point 3). After the first wave of the pump and rollback, the second wave usually follows - at point 4 you can sell the cryptocurrency profitably. But don't take risks and don't wait too long: the second rise will also be followed by a drain.
Attention! Never buy crypto at point 4. If you do this, after the second dump you can “remain an investor” for a long time, since there may not be subsequent growth.
Always be wary of forums and groups with signals to buy and sell cryptocurrency, or “insider” information. Don't believe everything you read unless you can verify the information with guaranteed reliable sources!
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Pump and dump – is it legal?
If you have watched the wonderful film “The Wolf of Wall Street”, then you have a rough idea of how this type of fraud works. In a normal exchange environment, such manipulations are strictly prohibited.
Financial fraudsters must be punished
However, cryptocurrencies are decentralized and do not have an appropriate legislative framework, so pump-dump transactions cannot be considered illegal, although they cause significant harm to the crypto industry as a whole, undermining the authority and level of trust in digital money.
After a major investigation by the Business Insider portal, one of the leading cryptocurrency exchanges sent out emails to its users warning that the accounts of users caught in such financial fraud will be blocked:
“Per our terms of service, the exchange will suspend accounts that engage in such activity. The relevant authorities will also be notified about this,” the letter says.
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A cryptocurrency pump is an artificial “pumping” of liquidity into a coin in order to make a profit. The essence of the method is a sharp increase in quotes, created by serious investors with a subsequent sale.
How do they make money on the pump? Large investors, organizing a pump, wait for the price to rise. Then they sell the asset and make a profit. Those, those who bought during growth and at the very peak lose part of their capital or all investments if it drops to 0.
Cryptocurrency pumping is not an end in itself. It is important for the organizers that the price rises for subsequent dump (asset reset). At this moment they earn money.
The strategy is not applicable to all assets. A cryptocurrency pump is possible subject to the following conditions:
- Well coins must be stable without sudden jumps or trends. Coin is not initially of any interest to investors.
- The coin must be new. This way, it will be easier to pump and dump cryptocurrencies. Investors do not know about the project; it has not had time to prove itself. It's easier to lure them.
- The cryptocurrency must be at its minimum values. For good growth, pump organizers will need investment. Often, coins worth less than a US dollar per unit are used for pumping.
Who are the hamsters in the cryptocurrency market?
In the financial sector there is always someone leading and someone being led. In the stock market, the latter are called pigs. In the world of cryptocurrencies this hamsters. Beginner traders, no experience, investing in coins and various projects based on blockchain technology.
Hamsters most often become victims of pump and dump. When the price rises, they buy a lot near peak values, while the organizers are dumping their assets. Then, at the time of the sale, they try to get rid of the cryptocurrency and lose money.
How the pump happens, the main options
Organizers of cryptocurrency pumping usually work according to several scenarios.
Aggressive assumes opening buy transactions for all investments. Thus, he creates artificial demand for the coin, and its price begins to rise.
Pump organizers usually prepare the ground in advance by disseminating information about the project on forums and specialized websites. As a result, traders see coins rising. They begin to look for reasons for an upward trend and find them.
They “accelerate” the cost even more. The coin increases in value significantly. No one can predict the exact time of the pump in advance. Investors are waiting for an opportunity, and traders continue to “pump up” the coin.
At this stage, the organizers are closely monitoring to ensure that the demand for cryptocurrency does not fall. Otherwise, the reset may begin earlier than planned and the pump will be meaningless.
When the organizers sell all assets, the pump ends and a dump occurs. Traders see the situation and begin to dump coins. The price is dropping very quickly, and there are fewer and fewer buyers. Traders who bought at the maximum prices suffer from the pump.
Another option - unhurried purchase of an asset by pumps. Unlike the first option, the cost will not rise too rapidly. Such a pump harder to define. Further, events develop according to the first scenario. An informational occasion is created, the price goes up, traders join in, and when the organizers of the pump have no money left, the price turns down.
There is a third option. If the organizer does not receive the expected profit, he can slightly reduce the price by selling part of his assets, then starts buying again, thereby increasing demand.
Examples of pumps on cryptocurrencies
The chart shows the situation for the Monero cryptocurrency. October 2016 saw a sharp increase in interest in the coin. The chart shows a significant surge in volumes. By 2017, the situation is changing dramatically, and the price is almost returning to previous levels.
The pump and dump strategy was used even before the advent of cryptocurrencies. In the stock markets, unscrupulous brokers offered clients the purchase of cheap shares of companies that had no real value (so-called junk shares).
As a result, ordinary people lost money when it was revealed that the securities actually belonged to unpromising companies. A similar example is described in the film “The Wolf of Wall Street”. Jordan Belfort is a real person who sold junk stocks to clients.
Is it possible to make money from a cryptocurrency pump?
This question worries many traders. What is a cryptocurrency pump and how to make money on it? It all depends on the scenario of events. If aggressive, entering the market is extremely risky, as the price is rising quickly. There is a danger that a trader will buy at the top of the market or fail to dump the cryptocurrency in time.
Under a conservative scenario, the chances are much greater, since the price increases gradually. There is an opportunity to think things over and make an informed decision. However, there are risks since the dump is usually done very quickly. As soon as demand stops growing and supply comes to the fore, the price usually collapses sharply and panic begins. In such a situation, much depends not only on the speed of the investor’s reaction, but also on luck. If you fail to find a buyer for your assets, you may be left with nothing.
In a wave scenario, entering the pump is even easier. However, it is difficult to distinguish it from classic fluctuations in quotes during trends, which are usually accompanied by corrections. Cryptocurrency pumping is no different from trend trading, and many investors invest for the long term in anticipation of future profits.
How to find out when there will be a cryptocurrency pump
Groups are opened on the Internet and messengers in which pumps are discussed and announced. This activity is not regulated, so pumpers often act openly.
In this case, they also receive certain advantages, since more traders will want to take part in this process. This will allow you to achieve your goals and start dumping much faster.
It is more difficult to predict a pump on your own and most often traders fail to do so. The situation is further aggravated by the fact that this technique is difficult to distinguish from what happens within the framework. Then the price of the cryptocurrency can rise sharply due to demand, and then fall, as it turns out to be on the secondary market, where speculators accept it.
But if the ICO has already been carried out and the price has stabilized, the appearance of sharp candles on the chart indicates the emergence of pump signals. Determining a short-term pump in the process of its formation is not so difficult. As for the long-term or conservative, this is not easy to do, since the organizers are recruiting positions gradually.
How does a professional pump of the cryptocurrency rate happen?
Pumping cryptocurrencies is not an easy task as it may seem. It is arranged by professional players who understand perfectly well what they are doing. The first stage is always preparatory.
As part of the preliminary activities, the composition of participants is being formed(if the pumper doesn’t want to do everything alone). Further, assets are being purchased and preliminary “stuffing” information in the media(blogs, forums).
Large-scale purchase cryptocurrencies is happening usually then, when the public is already prepared. Before the pump, the rate is held in place and sometimes a preliminary uptrend is created to further spark investor interest.
The professional pump of the cryptocurrency rate does not stop at this stage. During periods of growth, pumpers usually support quotes from sharp drops by placing appropriate buy orders. Thus, an artificial uptrend is created, very similar to the real one.
This approach is somewhat different from classic pumping in that non-professional players begin to lose money during a trend. They buy near price peaks, then sell at the end of the correction and suffer losses.
The advantage of professionals is their understanding of the psychology of beginners. They know very well what cryptocurrency pumping is and how to use it in practice. Professionals are also aware that beginners are psychologically weaker and susceptible to emotions that they do not yet know how to control. Thus, Draining of novice investors and traders can be done both globally and gradually, attracting more and more participants to the pump.
How to recognize cryptocurrency pumps and dumps and protect yourself
To do this, you need to carefully read the information about the project. First of all, professional investors get acquainted with the site and white paper. If more than 50% of the information provided is of a general nature and is marketing, this should at least raise suspicion.
These precautions are the only thing an investor can do, but they are not so effective as to protect the trader from all risks. As has been repeatedly emphasized, professional pumpers are able to do so that no one will notice until the asset is completely “drained.”
How not to lose cryptocurrency on a pump
- Pay attention to the situation on different exchanges. Usually the pump is carried out on one site. This means that the cryptocurrency will not have the same trading volumes on others.
- Monitoring the schedule. If there is no important news, but the cryptocurrency grows significantly in a short period of time, this is a clear sign of an aggressive pump.
- Sometimes pumpers send messages calling to buy a particular coin through the exchange chat.
The main recommendation is to carefully study the project and if it seems promising, then it is worth investing despite possible pumps and dumps. A successful system will attract customers in the future, and internal cryptocurrency will be in demand.
Do you use such strategies or perhaps you have your own? Leave comments under the post.
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