Pumps&Dumps how it works in crypto?Hello, traders! Today, I'd like to explain how pumps work in the crypto world
I distinguish between two main types:
Fake Pumps:
These orchestrated pumps involve artificially inflating the price through the actions of a group of individuals or entities. They typically rely on coordinated buying to drive up the price.
Natural Trends:
These are price trends that occur organically due to project developments, macroeconomic factors, or news events.
Let's start with the basics. How are trends formed? It often begins with a news release on major news portals. This news then spreads through smaller influencers on various social media platforms, eventually leading to a trend that lasts for a while due to delayed reactions. Large corporations, banks, and other factors can sustain these trends for weeks or even longer. A notable example is FTX (a negative trend) and Pepe (a short but intense trend).
Now, let's delve into "whales." In the United States, the SEC closely monitors such activities and frequently imposes penalties or more severe punishments on traders. However, the crypto world operates differently, and pump schemes still exist.
Here are a few variations:
Signal Groups:
These groups provide analysis and signals that often prove profitable. Multiple groups may collaborate, accumulating significant amounts of altcoins in advance, and then initiate pump cycles, closing one combination of coins before moving to the next.
Scam Groups:
These groups engage in mass shilling, create fake news, and conduct mass marketing campaigns. They typically pump and dump coins within the same day, distributing coins to their audience and then swiftly exiting the market.
In general, it is possible to profit from these schemes if you can predict which coin will be pumped next. However, extreme caution is necessary, and close monitoring of the pump process is crucial.
Now, let's touch on the technical aspects of how a pump unfolds.
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Picture this scenario: You're a whale sitting on a hefty $200 - 300 million in USDT liquidity. Now, instead of IDX:SHID , let's consider the dynamics with $SHIB. Here's how it plays out:
The whales seize the moment and decide to gobble up the entire supply of CRYPTOCAP:SHIB available in the market, fueled by a significant event such as a Twitter endorsement (as we've seen recently). Given that CRYPTOCAP:SHIB typically experiences lower trading volumes compared to major altcoins like BTC or ETH, the cost of absorbing all available orders and driving up prices by a modest 10-20% isn't exorbitant.
As the pump kicks into high gear, it not only lures in retail investors but also captures the attention of fellow whales who want a piece of the action. The price trajectory continues to surge, setting new highs with each passing moment.
It's a classic scenario in the world of crypto trading, where strategic moves by whales can trigger massive market movements.
I've covered a bit and I think I'll continue the article if you support me with comments. Can I write about how the FWB:PEPE Pump happened, what do you think?
