Pump and Dump

A manipulative scheme where a group of investors artificially inflates a digital asset’s price by coordinated buying (pump), then sells off their holdings (dump), causing a price collapse and losses for others.

What is Pump and Dump?

Pump and dump is a fraudulent practice in the digital asset market where a group, often coordinated via platforms like Telegram, Discord, or X, collectively buys a low-liquidity asset, typically a small-cap altcoin or token, to drive up its price rapidly. This “pump” creates a perception of demand, luring unsuspecting investors to buy at inflated prices. The orchestrators then sell their holdings at the peak, triggering a “dump” that crashes the price, leaving late buyers with significant losses. For example, a 2023 Chainalysis report noted pump-and-dump schemes in low-cap tokens caused over $300 million in investor losses annually.

These schemes often target thinly traded tokens on decentralized exchanges (DEXs) like Uniswap or centralized platforms with low oversight. Promoters may use hype on X, false announcements, or fake endorsements to fuel the pump, as seen in cases like certain memecoins spiking 500% before crashing in 2024. Tools like Etherscan can reveal suspicious wallet activity, such as large coordinated buys, while platforms like TokenSniffer flag potential scams. X discussions frequently warn about pump-and-dump signals, like sudden volume spikes without fundamental news, urging users to avoid FOMO-driven trades.

Investors can protect themselves by researching tokenomics, checking developer transparency, and using tools like CoinGecko to monitor volume anomalies. Regulatory bodies like the SEC have cracked down on such schemes, with high-profile cases in 2025 targeting influencers promoting fraudulent tokens. Due diligence and skepticism of rapid price surges are critical to avoid falling victim.