A pump (from the English pump) is a deliberate mass purchase of a cryptocurrency aimed at artificially raising its price to the maximum possible values in a short time. The sharp rise in price is created not by real demand or fundamental reasons but as a result of the coordinated actions of a group of participants seeking to inflate the quotes.
The mechanism of a pump is usually built on market psychology. The rapid rise in price attracts attention and generates a fear of missing out among other traders. New buyers pour into the asset, pushing the price up even more. During this time the organizers gradually take profit, selling previously bought coins at the peak of the hype.
Signs of a pump
- an abnormally fast rise in price without real news or project development;
- a surge in trading volume on a low-liquidity asset;
- aggressive promotion of the coin in chats and social networks.
A pump carries a high risk for those who enter the asset on the wave of hype: after the buying is exhausted, the price, as a rule, rolls back just as sharply. Recognizing such schemes helps you avoid becoming a source of profit for the organizers.
