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Pump-and-dump

Pump-and-dump

Beginner
A "pump-and-dump" is a fraudulent practice in the cryptocurrency space where the price of a digital asset, be it a token or a non-fungible token (NFT), is artificially inflated (pumped) to attract investors and then rapidly sold off (dumped), typically leading to a sharp price decline.

The operation usually begins with a small group of individuals, often the creators or early adopters of a certain asset, purchasing or holding large amounts. They then use various strategies, like promoting the asset on social media or spreading false news, to inflate the price, build hype, and attract new investors.

This can lead to increased demand and a surge in the asset's price. Once the price peaks, the group who orchestrated the pump sells their holdings (dump), causing a swift and drastic price drop. This leaves the late investors, who bought the asset at its inflated price, with losses as they are unable to sell their holdings before the price falls.

While some might be lured by the prospect of quick profits in a pump and dump, it's crucial to remember that such strategies are not only unethical but also illegal. Moreover, they spread mistrust and can damage the overall development of the crypto space. Therefore, it's advisable to Do Your Own Research (DYOR) and invest in projects with solid fundamentals rather than chase quick, artificial gains.