What Is a Pump and Dump (P&D) Scheme?
A pump and dump (P&D) scheme is a coordinated effort by a group of cryptocurrency traders to artificially inflate a particular coin’s price and trading volume for personal gain.
This scheme typically targets low-volume coins and manipulates the market to create a temporary surge in demand.
In a pump and dump scheme, the organizers select a specific coin and exchange to target.
They strategically buy a large amount of the chosen coin at a low price, creating the illusion of increased demand.
This attracts other traders and investors who are unaware of the scheme, causing them to buy the coin and further driving up its price.
Profits and Losses
Once the targeted coin’s price reaches a predetermined or specific price target, the organizers sell off their holdings, making significant profits.
This sudden sell-off triggers a rapid decline in the coin’s price, leaving unsuspecting buyers with substantial losses.
Pump-and-dump schemes in the cryptocurrency market have gained attention due to their potential for significant financial fraud and market manipulation.
It is essential for traders to be cautious and conduct thorough research before investing in any cryptocurrency to avoid falling victim to such schemes.