The crypto courses are not exploding anymore. Several hundred percent return in a few days are no longer possible. At least not just like that. The “new” money drips only sporadically in the market. The happy gold digger mood in the crypto west is over. Only one thing has remained: greed.
What do resourceful speculators do when prices no longer skyrocket? They make it explode: Pump & Dump is the magic word.
A pump & dump is the technique of artificially celebrating the price of a certain cryptocoin – and then selling its positions as quickly as possible and as profitably as possible.
This is Pump & Dump. Each candle stands for a minute. After four minutes the price has reached its peak. Then it’s just downhill and after half an hour, the haunt is over.
Previously, Pump & Dump was reserved for major investors. Only those with powerful financial resources could manipulate the course. But earlier it was when the phone had a turntable. A contemporary phone has apps – for example, “Telegram”: a Whatsapp derivative from Russia.
With Telegram, thousands of members can chat at the same time – and that’s how Pump & Dump groups are organized. The administrators determine a primeval time when the participants have to stand trellis. Which crypt they are after is not yet announced. Of course, they cover up primarily with it.
At the agreed time, the cat is let out of the bag, whereupon the members of the group start the purchase at the same time. Several tens of thousands of members comprise such groups. Collectively, they generate so much demand that the price explodes. That in turn attracts imitators. Now it is only necessary to sell the accumulated reserves profitably.
A pure redistribution
The biggest profiteers are the organizers. While they quietly repay their previously accumulated positions at pumped prices, the group members do the dirty work and push the price higher and higher. In the wake of the organizers, the fastest and most attentive participants come to the kiss – and those who have their greed under control.
If you over-peck, over-command sales orders, oversleep or otherwise have no plan, you will be penalized – and that’s the majority. The course can collapse within seconds. At a worthwhile deal can not be thought now.
On the track are newcomers, naïve followers, outsiders, poorly informed, people with bad Internet connection. They pay the bill.
After a few minutes, the powder vapor is removed – the price moves back to baseline. The admins and a few group members rub their hands, the majority licks the wounds. Pump & dump is a zero-sum game, a pure redistribution from the naive greedy to the boiled greedy.
No one is forced to play this game, argues the proponents. The victims themselves would only have wanted to make a lot of money quickly. In addition, everyone is guilty, who with a knife to a shooting show. That the heavily armed opponents use mufflers and thus conceal their own firepower is part of the tactic.
Allowed in crypto, banned on the stock markets
Pump & Dump is not a new phenomenon. The manipulation tactic exists since there is trade. It used to be reserved for the fine gentlemen in the cigar lounges: Wall Street Wolves.
That changed. The well-known Pump & Dump organizer Jonathan Lebed earned huge sums of money during the dotcom era. Lebed was 15 years old at the time. Even in crypto, the phenomenon is not new. 2017 was the year of the ICOs – and the Hardforks. 2018 is the year of the price winter – and (as a consequence of it) the pump & dump groups.
Today, every apprentice can organize a pump & dump with a smartphone and a little social media skills. Despite all the criticism: The “social” media have made pumping and dumping possible for the infantry as well. The elite has been deprived of the sole right to the questionable methodology. After all.
The question of whether one’s own savings should be used in such a way, and whether one is willing to enrich oneself so boldly on the naivety of other people, every crypto-speculator must answer for itself. In the end it is trading in the legal vacuum – on steroids. Not more.
In the less-legal area, regular stock trading, legislation has settled the issue. Pump & dump is prohibited and will be punished. The argument is that the market should reflect all freely available information. But pump-and-dump groups are privately organized and their administrators have a “knowledge advantage”. They operate insider trading.
It is only a matter of time before prohibition requirements are formulated for cryptos. How such a law would be implemented is another question.
In addition to the financially damaged, there is another group of losers: the tech romantics and blockchain fans.
They fear that Pump & Dump will bring another wave of regulatory demands. Many cryptophans are already complaining about exchanges that provide tax offices around the world with information about the activities of their users. Without them, the authorities would be in the dark.
In addition, Blockchain romantics fear that their beloved technique could again be discredited. And that, even before she has finally established herself.
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