## Why Pump and Dump has Become the Most Common Trap in the Crypto Market

You may have heard the term "pump and dump" in the crypto market, but not many investors truly understand the harm it can cause. This manipulation technique seems simple, but the losses it incurs are enormous.

### How traps are set

The mechanism of pump and dump is actually quite straightforward: a small group of people (usually early holders or behind-the-scenes promoters of a certain project) first accumulate a large position at a low price, and then promote it everywhere through social media, forums, and even fake news, creating the illusion that "this coin is about to explode." They exaggerate the project's prospects, fabricate partnership news, and even manipulate on-chain data to attract retail investors to follow suit. When new investors continuously pour in and the price is pushed to its peak, this group suddenly sells off in large quantities – this is the moment of "dump."

The price plummeted instantly, and those who were driven by FOMO emotions and bought in at high prices became the bag holders, suffering heavy losses.

### Why is this type of scam so effective?

The reason why pump and dump schemes are repeatedly successful is that they exploit human weaknesses—the desire for wealth and the anxiety of missing out on opportunities. When you see the price of a certain coin soaring and the community discussing it frantically, rationality can easily be drowned out. The asymmetry of information in the crypto market further provides a breeding ground for such manipulation.

### How to protect yourself

The most effective defense is to do your own research (DYOR). Before investing in any encryption asset:

- Conduct in-depth research on the project's fundamentals and technology
- Be wary of excessive hype on social media.
- Check the distribution of token holders to see if it is highly concentrated.
- Do not blindly follow trends, do not be tempted by short-term price increases.
- Choose projects with real application scenarios and strong community support

The healthy development of the crypto ecosystem requires rationality from every participant. Identifying pump and dump schemes and staying away from such traps not only protects your funds but also shows responsibility towards the entire market.