Pump and Dump
A scheme where organizers artificially inflate an asset's price through coordinated buying or hype, then sell their own holdings into the resulting demand.
A pump and dump is a scheme where organizers artificially inflate an asset's price — often through coordinated buying, misleading hype, or a combination of both — specifically to attract other buyers, then sell their own pre-acquired holdings into that resulting demand before the price inevitably collapses.
Pump and dump schemes most commonly target low-liquidity assets, where a relatively small amount of coordinated capital can produce an outsized price move; late buyers who enter after the organized pump has already begun are the ones who absorb the loss when organizers sell (see Kaavon's "Exit Liquidity" glossary definition).
Examples
- A pump and dump scheme most effectively targets a low-liquidity asset, where relatively modest coordinated capital can produce an outsized price move.
- Organizers of a pump and dump sell their pre-acquired holdings into the demand their own hype or coordinated buying generated, before the price collapses.