By Cryptonew.org 
Pump-and-Dump is a fraudulent practice in financial markets, particularly prevalent in the cryptocurrency sector. It’s a strategy where a group of individuals or organizations artificially inflate the price of a cryptocurrency (pump) to attract other investors, only to sell off the asset quickly (dump), causing its value to plummet and leaving late investors with significant losses.
How Pump-and-Dump Works
+Inflating the Price (Pump): The perpetrators start by buying a large amount of a low-priced cryptocurrency. They then use various tactics to inflate the price, such as spreading rumors, creating fake news, or using bots to generate fake transactions, which creates the illusion of high demand.
+Attracting Investors (FOMO – Fear of Missing Out): As the price rises, it catches the attention of other investors, particularly those who are inexperienced or fear missing out on potential gains (FOMO). This drives even more people to buy, further inflating the price.
+Selling Off (Dump): Once the price has reached a peak that allows for maximum profit, the perpetrators sell off their holdings en masse. This sudden sell-off causes the price to drop sharply, leaving those who bought in later with significant losses.
Consequences of Pump-and-Dump
+Financial Loss: Investors who fall victim to a pump-and-dump scheme can lose a large portion or even all of their investment when the price collapses.
+Erosion of Market Trust: Pump-and-dump schemes erode trust in the crypto market, particularly among new investors, which can hinder the market’s sustainable growth.
+Regulatory and Legal Challenges: Many countries are beginning to implement stricter regulations to combat pump-and-dump schemes. However, due to the decentralized and often anonymous nature of the crypto market, enforcing these regulations remains challenging.
How to Avoid Pump-and-Dump
+Conduct Thorough Research: Before investing in any cryptocurrency, make sure to research the project, the development team, and the overall market situation thoroughly.
+Avoid Herd Mentality: Don’t let emotions drive your investment decisions. If you see a sudden price increase without clear reasons, be cautious of potential manipulation.
+Rely on Credible Sources: Only trust information from reliable sources and avoid rumors or information from unverified channels.
Pump-and-dump schemes are a significant issue in the crypto market, leading to substantial losses for those who are unprepared or lack knowledge. By understanding how these schemes work and knowing how to avoid them, you can protect your investment and engage in the market more wisely.
Disclaimer: Information from CryptoNew – This article is based on aggregated information for source internet and is intended for reference purposes only. Readers should conduct their own research before making any decisions that could affect themselves or their businesses and should be prepared to take full responsibility for their choices.