Dump and pump are common manipulation strategies in financial markets, used to distort the true value of assets and generate illegal profits. Dump and pump are based on artificially creating the impression of volatility and rising prices for certain securities or cryptocurrency. Let's take a closer look at how these strategies work and what their consequences are.
Pamp
A pump is a process of artificially increasing the price of an asset through massive purchase transactions, creating the impression of an increase in demand and further stimulating investors to purchase this asset. This can cause the price to rise sharply in a short period of time, which attracts the attention of new investors looking to cash in on quick profits.
Dump
A dump is the opposite strategy in which an asset is sold en masse at an inflated price, causing panic among investors who begin to dump their assets en masse. As a result, prices fall sharply, leading to large losses for participants who did not manage to sell the asset before the dump began.
Mechanism of operation
Pump and dump are mainly carried out by groups of manipulators coordinating their actions via the Internet and social networks. They may promote an asset, spread false information, or even create fake news to manipulate investor behavior. After artificially creating supply or demand, the group provokes a short-term change in the price of the asset in the desired direction.
Consequences
The consequences of a pump and dump can be catastrophic for the market and investors. Sharp price fluctuations can lead to a loss of confidence in financial instruments, increase market volatility, and even lead to regulatory investigations. Investors who are not aware of these schemes may lose significant funds.
Methods of protection
To avoid pump and dump situations, it is important for investors to be vigilant and aware. It is necessary to conduct a fundamental analysis of assets, not blindly follow the advice of dubious sources and keep yourself updated with news and events in the market. It is also recommended to pay attention to trading volumes and do your own research before investing.
In conclusion, pumps and dumps are dangerous manipulation schemes that can cause serious harm to both individual investors and financial markets as a whole. To protect against these risks, it is important to be informed, proactive and use common sense when making investment decisions.
