Dumping is the process of accelerating the growth of the value of an asset, while misleading traders, using exaggerated or fabricated facts, with the sole purpose of increasing the demand for the selected asset. By their very nature, the authors of such “schemes” pursue only one goal – to “charge” the public with false judgments that the price of the asset has allegedly started to rise and it is worth selling as long as the imaginary growth gradation continues.
Despite all this, dump sellers have large reserves, the sale of which leads to an “oversaturation” of buyers and causes an immediate drop in value, often to the original figure.
Dump and pamp are like two twin brothers, one of which simply “tricks” the public by performing a deliberate “trick”. Dump saturates the public with impressions, creating the illusion of real demand. And as soon as the audience begins to believe the fictitious data, a dump appears whose task is to immediately dispel the impression created.
Where do these concepts come from? From the past.
The practice of pamping has a very long history, as the movies “The Wolf of Wall Street” and “The Boiler Room” eloquently attest. Back then, pamping was done by cold calling customers and offering to buy something at the lowest price. As soon as enough people were interested in such an offer, the trader and his assistants would sell the stock, resulting in a steady 95% drop in the price of the asset. A very simple but working scheme of the classic pump.
Why does dumping and pamping of digital currency come into play?
It makes sense that dumping and pamping are illegal schemes, the conduct of which is prosecuted by criminal laws around the world. But there is a definite “but” – to date, no state in the world has officially declared digital currency regulation at the national level. And if there is no approved regulation, you can push and dump without fear of being caught and punished.
What is Push and Dump 2.0?
The authors of today’s push and dump are using slightly different technologies and developments than before, but the essence remains the same. Now they use e-mail instead of landlines, virtual messengers instead of paper mail, create the illusion that they are official representatives of companies and can help you get high returns in the shortest possible time.
Another category of scammers holds ICO, promising “tasty” discounts at the pre-sale stage (up to 70%), with the only goal – to sell large volumes at a very expensive price, leaving clients without a penny, because such a token will quickly lose its value, and users will suffer enormous losses.
Who can carry out cryptocurrency pamping and dumping?
As a rule, such schemes are carried out not by a single fraudster, but by a whole group that has quite impressive capital, which in turn is focused on weak, cheap digital currencies, because no significant investment (as practice shows – from 50 to 500 thousand USD) is required to increase their financial attractiveness.
How does the scheme of the pampa look like?
The growth of purchases is made simultaneously with the warming up of the public, which is offered the following:
Development of fictitious facts about the firm and its future prospects;
The publication of fake advertisements, associated with a rapid increase in profitability of the advertised product;
Calculating the duration of the bump to get as many people to “bite” as originally planned;
Conducting a final throw-in of data (for example – “we have 10 minutes to go”). This urge encourages users to buy chaotically, without really understanding all the intricacies of the project and its technological base.
Which digital assets suffer the most from dumping and dumping?
Often, coins not known to very many people get “hit”, for example – shit-coins. Their market price is very low and their capitalization leaves much to be desired. It is inexpensive and less popular currency that pampers choose as their “victim”.
How do you define a pamp?
According to Dow theory, price will determine everything. It’s enough to be a little observant and not get suckered in by tempting offers promising a mountain of gold tomorrow.
To avoid falling through the cracks, you must:
- Carefully check the traffic. In the trading terminal, make sure the value is not in an accumulative stage – a low-latitude sideways;
- Analyze the established trading volume and the amount of market capitalization. In 24 hours of trading volume should be at least $300,000 and capitalization of about $10 million USD;
- Check advertising. The more information about the project you find on popular social platforms, the better. The massiveness of the project is an eloquent testimony to the growing popularity of the token, therefore, it is used, and it will not disappear in the near future.
Bottom line
Pump-and-dump schemes are illegal investment schemes in which traders attempt to artificially inflate the price of a security by disseminating false and overly promotional information. This market manipulation can cause investors to buy into the hype, only to see the stock price plummet after the insiders sell their shares. To avoid getting caught in a pump-and-dump scheme, it is important to do your own research and be wary of any “hot tips” you may hear.