CryptoURANUS Economics: Pump and Dump: Defined in CryptoCurrency

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Thursday, August 9, 2018

Pump and Dump: Defined in CryptoCurrency

Pump and Dump: Defined in CryptoCurrency

 

A pump and dump is defined as an illegal manipulation of an asset (stock, crypto, etc.) where people increase the price (the pump) so that they can sell it at those high prices for a profit (the dump). 


The person creating the pump and dump must first get some of the asset. Then they convince others to buy the asset using exaggerated or fake news causing the price to rise. At that point, they sell what they own. With no one promoting the asset, prices drop and many people are left with worthless assets and wasted money.


“Pump and dump” is often used in the crypto space to mean sharing news in forums and chat groups to encourage people to buy a crypto. As more people begin buying, the price rises and sellers can get rid of their coins to these new buyers at a profit. Because the US Securities and Exchange Commission is not yet regulating the crypto space, pump and dumps are common.

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