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What Are Crypto Pump and Dump Groups?

29 Aug 2022 By : Shubham Jangid
Southeast Asia’s Lar

The concept of pump and dump has been around for at least since the seventeenth century when con artists who bought the stock of South Sea Company were spreading fraudulent bullish information around the markets about the company in order to pull up the price synthetically. The company rose significantly, followed by a massive dump. The incident is now known as the South Sea bubble.

Pump and Dump groups, in a way, have evolved since then, but the concept is essentially similar. Artificial and planned pumps are done by influencing retailers to buy heavily; before that, planners create a heavy position in the asset in talk. Once the price reaches the target price, the asset is sold at market price in a flash resulting in (generally) a flash crash; consequently bursting the bubble. 

Crypto pump and dump groups also work essentially in the same way. With the lack of regulation and high volatility combined with a market full of sentiment-driven retailers, pump and dumps are a piece of cake.

Legal or not, pump and dumps are ethically questionable, but we also cannot deny the fact that these groups can be massively very profitable if the participant plays their cards right. These are usually flash trades taken on within seconds and required to sell for a profit in less than 30 seconds.

Essentially, there are two types of pump and dump groups, but before that, we need to understand how they work. Let us take a deep dive into it.

Crypto pump and dumps, how do they operate?

A free crypto pump signal is intended to persuade retailers to purchase cryptocurrencies at a given time or in a time frame to manipulate markets in order to gain profit from it. After publishing the call or signal, the price of the said cryptocurrency will gain a hike; the admins of the group then dump their bags onto members, thus trapping them.

On social media websites like Telegram and Discord, the admins that post signals generally choose coins that have low liquidity and low volume to hold the grip on the price action.

From a group admin's point of view, there are three major requirements to carry out a successful pump and dump operation.

1) High social media reach

Pump and dumps cannot work if there are no or fewer participating members. The success of such schemes is directly proportional to the members participating. Therefore a huge community across different platforms is a mandatory requirement.

But a huge community is also not enough; members who have already lost money might not participate. It is also important to note that crypto being a global market, it is not necessary that all members will be online or awake at a given point in time. A hyped-up community with new joining members ACTIVELY participating is a challenging but mandatory requirement. 

2)Market knowledge

You cannot just plan pumps at random times, a coin in talk needs to be properly studied along with the team and its community, and then it is to be decided when the pump should be triggered. Apart from that, not every market situations are good for pumps; for example, over-leveraged coins cannot be pumped as much as coins with low volumes. Since a pump needs to be planned days prior, a good fundamental and technical analysis of both the coin and markets are a must. 

3)Smart finance

The selected crypto is supposed to be of low volume and liquidity but in a famous exchange like Binance so that it is accessible to all the members of your community. Besides, to make a considerable profit out of it without alarming others, your team needs to make sure that your buyer does not create suspicious candles. Hence it sometimes takes weeks for a perfect pump and dumps setup. 

Many groups of individuals in discord servers and telegram channels are organizing pumps and dumps; these groups also work in a hierarchical structure to increase both participation and new members. For example, if you refer someone, your level increases, and you will get your signal a couple of seconds before others who are on a lower level than you. This generally happens in discord servers. In telegram channels, where the UI is quite simple, there are only two levels, one is the general level, and the other is the VIP level, where the users have to pay to get these signals early. The payments can be anything from $100 to $10,000

Types of Pump and Dump groups

Transparent groups

These channels are quite transparent with what they are doing, and they even have names related to pump and dump into their channels and so on. Since these groups function openly, their members are the ones who believe that they can profit from such organizations. They try to increase their level in the group hierarchy and thus profit more. They try to profit from the pump and dumps by timing the dumps. 

Non transperent group

These groups con people into believing that they are giving responsible financial advice, some of them might even work, but others just fall right on their member's faces. They make fake screenshots of their calls and signals into their premium groups which supposedly have very high accuracy. Free members are persuaded to pay and upgrade to premium, and premium members are persuaded to pay and upgrade to other levels(if there are any)

There are many transparent pump and dump groups out there; some are really profitable for members, some are admin-centric, and some are pump and dump wannabees who are either new to the game or lost their credibility. Let us look at some of the transparent pumps and dump channels that you should check out. 

Some famous pump and dump channels around the internet

Mega Signals Group

Mega Signals Group organizes pumps mainly on Binance; this group has a massive following of 100,000 members only on Telegram. These guys pull off at least 300% in a span of a few seconds; pumps are organized once or a couple of times a month. What's significant about this group is they provide all the information for free to everyone, with no need for any kind of membership or arbitrage to get the information first. They even let users know a week prior about where the pump will happen. They also have a support channel that helps members with their queries. mega pump mega pump is a bilingual channel (Turkish and English); it is a relatively newer channel with fewer subscribers, but it is still quite effective. The group is known to organize pumps with at least 100-300% movement. Since the MeXC exchange lists new and illiquid cryptocurrencies, it's famous for hosting many low market cap gems. 

Note:- It is important to note that we are not in any way giving any type of financial advice by mentioning the above-mentioned groups. Investing in pump and dump strategies can be catastrophic for your portfolio, and we are not in any way recommending you to do that. 

Final Words

Pump and Dumps carry high risk but like many other things they are part of the crypto ecosystem. These groups, especially the scamsters, thrive on lack of regulation, and the fake notion of easy money works for itself. It is very difficult for an investor to thrive solely on these. Always remember to DYOR (Do Your Own Research) before entering into anything.