Crypto Pump & Dump:
We often see huge pumps and dumps in crypto market. Have you ever thought of the reason behind these?
Cryptocurrencies experience pumps and dumps primarily due to a combination of factors, including market dynamics, investor sentiment, and external events. But I will tell you the biggest factor on which pump and dump mostly depends:
Market Manipulation:
Market manipulation refers to when some people intentionally try to control the price of a cryptocurrency in order to make a profit. They take advantage of the fact that the cryptocurrency market is not closely regulated, meaning there aren't many rules to prevent such activities.
A pump and dump scheme is a specific type of market manipulation. In this scheme, a group of individuals work together to artificially increase the price of a cryptocurrency. They do this by buying a large amount of the cryptocurrency at the same time, which creates a lot of demand and makes the price go up. This sudden increase in price is called a "pump."
Once the price has gone up significantly, the people behind the scheme sell their own holdings of the cryptocurrency at the higher price. This creates a lot of selling pressure, causing the price to drop quickly. This rapid decrease in price is called a "dump."
Unfortunately, this scheme can happen very quickly, catching many investors off guard. People who are not part of the scheme and have bought the cryptocurrency at the inflated price may end up losing money when the price crashes.
Make sure to do your own research and only invest what you can afford to lose.
Regards,
Esha