Many people ask, what exactly are the pump and dump? I decided to explain this because it’s really important for anyone entering the cryptocurrency market.

In short, pump and dump is a type of price manipulation. Scammers buy large amounts of an unknown coin at very low prices, then start heavily promoting it on Twitter, Telegram, and Discord with exaggerated claims. The price skyrockets rapidly, people panic about missing out and start buying at the top, then the scammers quickly sell their holdings and disappear. The result? The price crashes, and new investors suffer heavy losses.

The process goes through four clear stages: first, the stealth buying phase where scammers accumulate large quantities at low prices. Second, intensive and exaggerated promotion across all platforms. Then the price begins to rise rapidly ( that’s called the pump ), and finally, the sudden crash ( the dump ) when they start selling.

How to avoid falling into the trap? First, watch out for warning signs. If you see an unknown coin’s price soaring rapidly without real news to justify it, that’s a red flag. Also, if the promotion focuses on hysteria and fear of missing out instead of actual technology or the development team, know that something’s wrong.

Check the trading volume as well. A sudden spike in trading on a small coin often indicates coordination among scammers. If there’s no clear information about the development team or a genuine whitepaper ( Whitepaper ), that’s a very strong warning sign.

A classic example that illustrates this is BitConnect. This project promised people huge returns of up to 1% daily. The promotion was massive, and people started investing large sums. The price soared insanely in a very short time. But in 2018, everything collapsed. It turned out the entire project was a massive scam, and the coin’s value dropped from its peak to nearly zero. Regulatory authorities shut down the platform, and investors lost huge amounts of money.

To protect yourself, first, study any coin before investing. Research the team, partnerships, and actual technology. Second, avoid any coin that relies on hype without real value. Third, watch for suspicious behaviors in the market, like unexplained surges.

Most importantly: don’t make decisions based on fear or hysteria. FOMO makes you do wrong things. Also, diversify your investments—don’t put all your money into one coin. Use reputable and legitimate exchanges, as they conduct thorough checks before listing new coins.

By these steps, you can significantly reduce risks in the cryptocurrency market.