The Risks of Participating in Pumps

One major risk is entering late in a rising market. After the market turns, there is a sharp imbalance in favor of the sellers and you simply don't have time to sell the coin at the buy price. And you don't know that you can sell at all. You also can't know in advance which coin will have a pump or about which coin and when Mr. Musk or Zuckerberg happens to say it, either.

Success is determined by the speed of your reaction - the faster you buy a coin immediately after the news is released, the more chances you have to make money. Sometimes it's a matter of minutes or seconds. And one more point - to have time to sell a coin while there are active buyers.

Another risk is a failed pump. Organized cryptocurrency pumps don't always have the desired effect. The task of organizers is to attract a large amount of capital to a coin. And if it is not enough to have a significant impact on the price, the investor is left with an illiquid asset that will be difficult to sell even at the current price.

Signs of Pump and Dump

The main signs of Pump and Dump:

• An abnormal spike in price that does not coincide with the growth of the entire market. "Junk" coins often follow the general trend. If such a coin shows a growth of 100% for the day while the total capitalization or top 50 coins grow by 10%, it is a sign of artificial acceleration.
• Abrupt growth of volumes and price on one site and absence of similar movement on other sites.
• Active advertising of unknown coins in chats, pubs, forums, and social networks.

Any price surge having no fundamental confirmation, no logic, and accompanied by an intrusive marketing campaign is a reason to weigh possible risks.

In the next article, we'll talk more about examples of cryptocurrency pumps and dumps.

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