Pump and Dump: how crypto traders fall into the sharks' trap

Do you remember Tierion (TNT) in May 2020? In 10 days, the price jumped from $0.05 to $0.11 (+120%), and then fell below the starting price to $0.03. A classic pump-and-dump.

This is not a coincidence — it is a strategy used by large players to gain quick profits. Let's break down how it works and how not to become the next victim.

What is pump?

Pump is a coordinated purchase of a large amount of coins in a short time. Result: demand increases, the price skyrockets, and trading volume explodes. Sounds good? Trap here.

Sharks accumulate coins at low prices and then launch an information campaign (positive news, FOMO, forecasts from “experts”). Inexperienced investors buy, the price perfectly soars. Everything looks like a takeoff.

Then comes the dump

When the price is high enough, the sharks start selling — large volumes. Liquidity evaporates, the price collapses, panic in the chat. Those who bought late are now holding losses and are forced to cut their losses.

Why does this work?

1. The Psychology of FOMO — people are afraid of missing out when they see rapid growth. Sharks know this and press on emotions.

2. Weak regulation — the crypto market is not as regulated as the stock market. There are no serious penalties.

3. Liquidity — large capital allows for the manipulation of small coins. A purchase of 100K can easily change the price of a coin with a market cap of 1M.

4. ICO boom — new projects often fall victim to pump strategies in the first days after launch.

How to recognize a pump?

• The coin is cheap and not well-known, but suddenly everyone is talking about it on all the forums.
• In 24-48 hours, the price has increased by over 50% without any significant news.
• A celebrity or “influencer” suddenly mentioned this coin
• The wave of positive posts on Telegram/Twitter seems coordinated.

4 ways to protect your capital

1. DYOR — Do Your Own Research Before investing, study the team, roadmap, and technical documents. If there is nothing to say about the coin other than rumors — it's a red flag.

2. Don't catch a falling knife If a coin has grown by over 100% in a few days and everyone is talking about it — you are not early, you are late. Most of the pump movement is already over.

3. Risk Management Don't put all your money into one coin. Determine the percentage of your portfolio that you are willing to lose without harming your mental state, usually 2-5%. Use stop-losses.

4. Invest in large coins with a history BTC, ETH, large projects with well-known teams have less chance of pump-dump because they are harder to manipulate. There is volatility, but the risk of manipulation is lower.

Conclusion

Pump-and-dump is a market reality, not a feature of crypto. But in crypto, it's easier to organize due to the low liquidity of small coins. The key is not to be emotional. Study, plan, invest in what you understand. Then the likelihood of falling into a trap is significantly lower.