I just realized that many people in the community still do not fully understand what a pump is, especially newcomers to the cryptocurrency market. Today, I want to share some things I’ve learned about this phenomenon because it’s really important if you don’t want to get caught in a trap.

Simply put, a pump is a sudden price increase of a coin caused by a group of large holders coordinating their actions. They buy in when the price is low, then create positive news and stimulate FOMO psychology to lure inexperienced investors to buy in. When the price is pumped up enough, they will sell everything to take profits, and that’s when a dump occurs.

I clearly remember the incident with Tierion (TNT) in May 2020. It was a small-cap altcoin that nobody paid much attention to. But suddenly, within a few days, its price jumped from $0.05 to $0.11, an increase of over 45%. Everyone on Facebook and forums was talking about it. But just 10 days later, the price plummeted to $0.03, even lower than the initial level. When I looked into it carefully, there was nothing special about this project, just positive rumors being spread.

What is the danger of a pump? It’s because it easily attracts newcomers. Sharks often choose coins with low prices and little recognition, making it easier to control the price. After accumulating enough coins, they start spreading information, creating fake comments from fake accounts to give the illusion of a promising project. The FOMO psychology of missing out makes people rush to buy without doing any research.

There are four main reasons why pumps still exist. First, large investors have enormous capital, making it easy to manipulate market psychology. Second, the FOMO psychological effect is very strong, especially when people see prices rising rapidly. Third, legal regulations in crypto are still unclear compared to traditional stock markets, making it hard to control. Fourth, ICO activities create perfect opportunities for sharks to execute this strategy.

The process of a pump usually consists of three steps. Step one is accumulation, buying when the price is very low. Step two is pumping and maintaining the price, during which they create forums, comments, and positive news to stimulate buying. Step three is dumping, when the price peaks, they sell everything to profit.

How to recognize if a pump is happening? If you see a coin’s price rising sharply within a few hours or days without any significant news, that’s a warning sign. If a forum or news site suddenly posts about a small coin, or a celebrity mentions it, be cautious. These are often part of pump-and-dump strategies.

I want to share four ways to avoid this trap. First, always do thorough research before investing. Learn about the team, project, partners, and the coin’s history. Second, don’t let herd mentality influence your decisions. There are many good coins out there; you don’t need to chase the crowd. Third, manage your risks and capital effectively. Make a detailed plan, determine a suitable capital ratio before trading. Fourth, consider investing in larger coins with high market cap, reputable teams, and long-standing histories. This will help you significantly reduce risks.

In summary, understanding what a pump is and related strategies is essential for anyone who wants to participate in the cryptocurrency market safely. By doing thorough research, managing risks well, and not getting caught up in herd mentality, you can protect your assets and trade crypto more effectively.