The cryptocurrency market, with its high volatility, is often subject to various manipulations such as pumps and dumps. In this article, we will look at what pumps and dumps are, how they affect the market, and what strategies can be used to recognize and avoid them.
1. What are pumps and dumps?
Pump: This is a manipulative strategy where a particular asset is artificially “pumped up” (increased) in value. The purpose of a pump is to attract more investors to create an impression of growth and attract new entrants.
Dump: This is conversely a manipulation in which the price of an asset declines sharply. It usually occurs after a dump, when the organizers of the manipulation start selling the asset en masse, making money on the price difference.
2. How to recognize pumps and dumps?
Trading volume:
Pay attention to the trading volume during sudden price changes. A sudden rise or fall in price with low trading volume can be a sign of manipulation.
Abnormal price movement:
Suspicious price changes that occur suddenly and without obvious fundamental reasons may indicate manipulation.
Social media and forums:
Numerous recommendations on social media or forums urging you to “invest now” could be a sign of an upcoming pampa.
Unusual events:
Watch for unusual events or announcements that could be a trigger for manipulation.
3. Prevention Strategies:
Conducting your own research:
Conduct your own