In the Crypto market, the question of what a pump is something that many investors are interested in. Pump and dump are two familiar terms in the cryptocurrency market. They mean pumping and inflating the price of a cryptocurrency much higher than its real value. Even long-time investors sometimes find it difficult to distinguish this in the market. Let’s join Learn Crypto Trading to learn more about this topic right now!

Learn in detail about the concept of what a pump is.

What is the basic concept of the pump? Why does a pump appear in the Crypto market? What does the appearance of this situation mean? Let’s answer these questions with Learn Crypto Trading.

What is the concept of a pump in the market?

What is the term pump in the Crypto market? Pump refers to a very large purchase of a certain cryptocurrency. To push the price up and cause investor demand to increase sharply. 

The coins chosen for pumping usually have low starting prices and very little information about them. After buying a large number of coins at this stage. The organizations behind the trappers mainly release accompanying information to lure uninformed investors into a FOMO with high prices. The price-squeezing process often happens relatively quickly and strongly. And there is often no adjustment that creates a FOMO syndrome in the market.

The concept of dump in the market

In contrast, to pump, dump refers to the act of selling a cryptocurrency. After the price of the coin has been pumped to a level much higher than the initial price. They will be sold for the difference. When all the organizations behind it have achieved enough profit. The price of the coin will stop increasing, and the trading volume will decrease. Panic began to appear in the market as prices continued to fall. Investors will panic and will quickly sell all their coins to recover capital.

See more: Knowledge you need to know about Coin Trading

What causes dump and pump?

Here are some reasons why the Crypto market is experiencing pump and dump.

Blockchain market liquidity

In the blockchain market, what is a coin? The liquidity of coins represents the level of buying and selling of any cryptocurrency. Currently, most individuals or organizations that consider sharks in the Crypto market own a huge amount of assets. Most of the capital sources of these organizations or individuals are much larger than the trading volume of one session. Because of this, these subjects are completely capable of manipulating the market. And they can also create a new wave for the Crypto market. Creating a pump or dump will help these organizations have higher liquidity and gain more profits.

Investors’ fomo psychology after Technical Analysis of the trade coin

The phenomenon of FOMO is an abbreviation of the phrase Fear of Missing out. It means the fear of missing out on opportunities. At these times, the sharks will take advantage of the opportunity to make new investors feel that they have missed many great opportunities. And if these investors are not quick, they will miss this opportunity forever. 

Playing on the fear of missing out on opportunities, sharks will create a new wave for investors to enter orders and then exit. Because of these psychological effects, investors accidentally allow sharks to take their money. 

After the ICO on a blockchain platform

A lot of sharks will go through an initial coin offering, or ICO, to hype the project. These ICO activities will often be conducted through famous people in the Crypto world. After some time, the price of that coin has grown many times compared to its real value. 

The whales will start dumping quickly and cause panic among investors. With the initial coin offering plan, they often target new Altcoins. Because these Altcoins do not have much trading volume and are not known to many investors.

Which technical analysis method should be used to trade coins when entering the market?

Crypto is an asset of the digital currency market. Technical analysis methods when trading Crypto can be divided into three groups. The first group is based on indicators. The second group is based on fundamental analysis. And the last group is based on psychology, trading by action principles.

Technical analysis of what a pump is.

Identifying a pump in the Crypto market is not too difficult. Unreasonable price increases, along with the lack of synchronization with the trend, are all signs of a pump. Long-term investors are not too concerned about this issue. That is why whale organizations often aim for new Altcoins.

When using technical analysis, investors can completely recognize some problems in the market when there is a pump situation. The first is that the price suddenly increases, and there are many orders with high volume at the same time. There are increased quotes, but only on one exchange. For other exchanges, there was no price increase. 

See more: Register MEXC account – Reputable Crypto broker

Using Momentum Trading in Crypto

In Cryptowhat is momentum? Trading Momentum helps investors detect the uptrend or downtrend of a cryptocurrency. Investors can rely on this trend to trade in the short term and make profits for themselves. Most of the time, when using this trading method, investors will buy at a market order and sell at a higher price.

It can be said that for the Crypto market, using Momentum is extremely reasonable. In each trading session, market fluctuations are always very large. Therefore, when using Momentum, investors can bring themselves profits even in short-term trading frames. Especially for Cap Altcoins and new Altcoins. These coins all have large trading fluctuations in one session. 

Conclude

With the above information, hopefully, investors have the answer to the question of what a pump is. Pump and dump in the Crypto market does not violate the law, and this activity is not prohibited at all. However, for small investors, this will be disadvantageous. To avoid this problem when trading, investors can choose coins that have been operating for a long time. Follow Learn Crypto Trading regularly to continuously update your knowledge about the Crypto market!

FAQs

How to detect pumps in the market?

Investors can follow the information in the media. Accompanied by a technical analysis of the charts of coins with sudden increases.

Is there a pump happening with Bitcoin?

Currently, BTC accounts for 40% of the crypto market. A Bitcoin pump is completely impossible.

Should you trade when a coin is showing signs of pumping?

When investors join at the right time, when the coin is rising, and can sell in time. This is also a good way to make a profit in the market.