I just reviewed some analysis articles about pump phenomena in the crypto market and realized the need to warn more about these tricks. Why? Because too many newcomers still do not fully understand how it works.

What is a pump? Simply put, it’s when a group of people (usually large whales holding significant capital) coordinate to buy a large amount of low-priced, little-known coins. They create a false demand surge, causing the price to spike suddenly within a few hours or days. The price rises without any real reason, just the crowd’s psychology being stimulated by positive rumors spread on Telegram, Facebook, or forums.

The scary part is the dump – the phase of selling off. When the price has risen enough, those executing the pump strategy will sell all or most of their accumulated coins. Result? The price plummets sharply, often below the original level. Late buyers – mainly inexperienced newcomers – get stuck with heavy losses.

I remember a clear case in May 2020 with the TNT (Tierion) token. Its price increased over 45%, from $0.05 to $0.11 in a few days. But just 10 days later, the price crashed down to $0.03, even lower than before the pump. Strangely, there was no significant news about this project, only positive rumors on Facebook. That’s a textbook pump.

Why does a pump happen? There are four main reasons. First, whales holding enormous amounts of capital, many times larger than daily trading volume, can easily manipulate retail investors’ psychology. Second, the FOMO effect – fear of missing out. When seeing a sharp price increase, newcomers feel pressured and rush to buy. Third, unclear legal regulations in the crypto market create loopholes for these tricks. Fourth, ICO activities also serve as golden opportunities for whales to inflate prices.

The operation of pump and dump is very simple: step 1 is accumulating coins when prices are very low, step 2 is stimulating buying through fake news and fake discussions online, step 3 is selling to profit. Done.

How to recognize a pump? First, a sudden price increase within a few hours or days without any clear reason. Second, rumors from forums or media, but usually without confirmation from official sources. Third, an anonymous coin suddenly mentioned by celebrities or becoming a hot topic on social media.

So how to avoid falling into a pump and dump trap? I have some advice. First, research thoroughly about the coin before investing – learn about the team, real-world applications, partners. Second, don’t let herd mentality influence your decisions. There are many good coins to invest in, no need to chase trends. Third, manage risks effectively – determine an appropriate capital ratio before entering. Fourth, prioritize investing in coins with large market caps, trustworthy teams, and long-term track records.

In summary, understanding what a pump is and how it works is essential to protect yourself in the crypto market. This strategy poses significant risks and negatively impacts market stability. By researching carefully, managing risks, and avoiding herd mentality, you can participate in crypto more safely and effectively.