The term 'Pump & Dump' is a market manipulation tactic where the price of a crypto is artificially inflated by using methods of spreading false information and excessive speculation.
Once the price of a token spikes high, the individual behind the mastermind initiates a risky strategy by selling the crypto token at the highest price and causing a sudden drop in value known as a 'Dump'.
This will cause panic to public investors with a sudden fall and experience very significant losses.
The 'dirty' method has long been established in the stock market, especially on low-value assets.
The tactic was introduced in the early 20's such as promoting through phone calls, emails or newspapers to invite people to buy it.
In the crypto market, the strategy appeared around 2010 at a time when the digital currency market still lacked exposure and lacked strict control.
In 2017, the popularity of cryptocurrencies began to soar and many groups began to publicly hold 'Pump & Dump' campaigns on platforms such as Telegram and Discord.
Some well-known tokens like Dogecoin were aggressively promoted by some in 2021 to the point of gaining sudden popularity with a jump of over 10,000% to 70 cents USD before it plummeted to 40 cents.
However, some countries are starting to take precautions such as the United States (US) which is taking action to prevent this kind of manipulation in the crypto market.
The Securities and Exchange Commission (SEC) also introduced rules and laws to protect investors from manipulative activities.
To avoid getting involved in 'Pump & Dump' activities, investors are advised to do in-depth research to avoid being influenced by rumors on social media and be careful with price movements that seem too dramatic in a short period of time.
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