Crypto Dictionary
Pump and Dump
Definition
A scheme that attempts to boost the price of a stock or security through fake recommendations.
Deep Dive
A "pump and dump" scheme is a form of market manipulation where conspirators artificially inflate the price of a cryptocurrency (or stock) through false, misleading, or exaggerated recommendations, and then "dump" their own holdings at the inflated price, leaving other investors with worthless assets. The scheme typically begins with the perpetrators secretly accumulating a significant position in a low-volume, often obscure, asset. They then coordinate to generate hype, often through social media groups, influential personalities, or fake news, to attract unsuspecting buyers.
Examples & Use Cases
- 1A Telegram group coordinates to all buy a specific low-cap altcoin at a set time, then simultaneously sell after the price rises from the induced buying frenzy.
- 2An influencer promotes a little-known token heavily across their channels, encouraging their followers to buy, without disclosing they own a large position which they then sell.
- 3A development team creates artificial hype around their token, leading to a price surge, only to offload a substantial portion of their holdings, collapsing the market.
Related Terms
Market ManipulationRug PullWash Trading