LeoGlossary: Pump and Dump

4 mo
LeoFinance
1 Min Read
209 words

A scheme of buying large amounts of an asset in an effort to pump up the price before turning around and selling it at the inflated levels. This is an illegal maneuver in most countries since it is manipulating markets.

A pump and dump is usually associated with some type of marketing campaign. The organizers seek to create a stir around the particular asset. They start the buying to get some volume going and them try to get others to follow suit.

As momentum gains, the price increases to the point where the originators start to sell their holdings. This, at some point, will stop the run up and things reverse course.

Cryptocurrency met a number of factors which made it a prime target for this scheme.

Many tokens are low prices meaning a large blocks could be acquired for very little capital. Also, there was a great deal of excitement surrounding anything related to cryptocurrency. This caused be to jump in looking for the "next Bitcoin". Finally, many tokens were thinly traded meaning a few large transactions could move the price in a large manner.

The world of Penny Stocks is a target rich environment for pump and dump schemes.

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