Pumps and dumps in crypto Learn

Two meanings of "pump and dump"

In everyday crypto talk a pump is a fast rise and a dump a fast fall — a coin that jumps 6% in three minutes has pumped. In a stricter sense, a pump and dump is a manipulation scheme: a group buys a thin coin, promotes it to attract buyers, and sells into their demand, leaving them with losses. Such schemes are illegal in regulated markets. Crypto Sonar tracks the first meaning — sudden price moves — and the second is a reason to be careful with them.

What causes sudden moves

• Short and long squeezes. A crowded side gets liquidated, and forced orders push the price further — see liquidations.
• News and listings. Exchange listings, delistings, partnerships, hacks and macro data move coins within seconds.
• Thin order books. On small coins a single large market order can move the price several percent.
• Coordinated buying. Groups that announce a coin and buy at the same moment create pumps that usually fade quickly.

How to read a sudden move

• Was there volume before it? A move that starts after volume builds up has participation behind it. A move that comes out of a dead market, with no volume before it, is more likely a single order or a thin book — and more likely to reverse.
• How much volume came with it? Compare the volume of the move with the coin's normal pace: ×5 is notable, ×50 means a flood of orders.
• How many times today? A coin that pumps for the third time in a day behaves differently from one that moves for the first time in weeks.
• What do open interest and liquidations say? A pump made of short liquidations ends when the shorts are gone; a pump with rising open interest has new positions behind it.

Risks of chasing pumps

By the time a pump is visible, the first buyers are already in profit and looking for someone to sell to. Entering after a 10% candle means buying where the earliest participants take profit, and sharp moves often retrace just as fast. A pump alert says the price has moved — not that it will keep moving. Use it to find what is active, then decide with your own analysis and risk limits.