A "pump and dump" is a form of market manipulation scam where a group of traders or influencers coordinate and artificially inflate the price of a cryptocurrency (pump) and then sell off their holdings at the peak of the cycle, allowing the price to drop. The idea here is to milk money from retail investors who bought into the market when prices were being pumped up.
Most of these scams come in small cryptocurrencies. Such cryptocurrencies are referred to as "altcoins." These coins are traded at low volumes. Low volumes mean low numbers, and hence, due to this cause, it inflates fast because of the lack of liquidity. It will thus present an illusion that this is a great investment.
How Does a Pump and Dump Work?
1. Pumping and hype: A group of traders or influencers begins to talk much about the price of some cryptocurrency, creating hype about it. This can be done at social networks, Telegram groups, or online forums like Reddit to spread rumors or any positive news that will generate interest in people who make them buy the currency.
2. The "Pump": with an increasingly amount of people getting on the wagon, the cost for this…
