What does it mean to "pump" a cryptocurrency?
The term "pumping" a cryptocurrency refers to an artificial increase in the value of a crypto asset. This manipulation is usually orchestrated by a group of traders or investors acting in a coordinated manner.
The goal is to simulate high demand to attract other investors, which drives up the price. Once the price peaks, the organizers sell their assets, causing the price to crash and often leaving newcomers with significant losses.
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How does the "pumping" process work?
1. Coordination between participants: A group of people organize themselves to massively buy a specific cryptocurrency, often through private channels or forums.
2. Rapid price increase: The mass purchase creates a sudden and artificial increase in the price of the asset.
3. Ripple Effect: This surge attracts other investors who seek to profit from the bullish momentum, which amplifies the phenomenon.
4. Dump: Originators sell their assets at the moment the price reaches its peak, causing a rapid fall in value.
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What are the risks associated with this practice?
Extreme volatility: Prices can collapse without warning.
Unfair manipulation: These practices are ethically questionable and often illegal.
Financial losses: Investors who arrive late in the process risk suffering significant losses.