The world of Crypto trading has seen a huge development lately with more people joining the hype train as learning resources are endless online, enabling anyone to make some decent profits with some time and cash to spare. This has been bolstered by recent media attention about the volatility of Bitcoin and the "Monday massacre" which saw Etherium drop to unbelievable lows.
In any case, This small article will be about Pump & Dump, what it is and what impact it has on crypto trading.
What is it?
Pump & Dump is the act of artificially inflating the price of a stock by purchasing large volumes of the currency with ultimate aim of selling the inflated currency at a higher price than purchased, making a neat profit in a very small amount of time. This is done collectively by groups made for this specific purposes and are so numerous, they can be found by a simple Facebook or google search.
This is not a phenomenon which exists in isolation to the crypto trading community. Pump schemes have existed for as long as tradition stock market shares have and the practice is actually Illegal for traditional stock trading.
Here, the beauty of Crypto trading can be seen, as this can be done without any legal repercussions due to a lack of regulation for Crypto currencies.
Is it bad?
The crypto community is rather split on this issue. From one perspective, one can argue that no, why should making quick profits be looked down upon? is that not the reason why most people get into crypto trading in the first place?
People who oppose the above point of view argue that Pumping & dumping actually damages the overall environment of trading and the chance for a specific coin to 'breath'. This is True, as a coin subject to a dump will cause widespread panic sales from investors who are in it for the long term and make it very difficult for them to achieve stellar profits from being an early purchaser.
It is not a secrete that Millionaires are made from long term investors who buy thousands of pounds worth of coins which cost pennies and then sell them a few weeks or months when the coin has quadrupled in value. Pump and Dump schemes damage the chances for success of such investors.
Should you do it?
Again, Two options here:
Yes, if
- You have a very low starting capital
- Need to make quick $$$ in order to invest for medium to long term.
Do this by noticing early signs of a pump and buy some Coins yourself, but don't get too greedy!
Don't, if:
- You have a larger starting capital and can afford to make a long term investment. Pumping with a large capital will ruin your chances of getting HUGE gains in the long term as coin value will hit the floor after a big pump & dump.
- You care for a coin. I.E a coin that has a product behind it that you actually want to see realized, the low price levels may mean the product might fail to even come to the market.
Thanks for reading! Please give me a follow for more posts like this to come! have a great day and trade responsibly :)