Many pump and dump groups will guarantee that you can get a 2000% return on your investment in a matter of minutes, but do they really work, or are they little more than a scam?
A pump and dump system is when a group of people agree to buy a given asset, which then causes the price of that asset to surge. At a certain point, the insiders of the group will all sell their shares of the asset, whilst members of the public continue to buy. This clever system allows you to buy at a low price and sell at a high one. This system is illegal in the stock market, but is allowed when you are dealing with cryptocurrencies, as it is so unregulated.
The anatomy of the pump and dump group is as follows. The organisers have complete knowledge of what is going to happen, followed by the paid inner circle, where people pay money to know which coins the organisers will be pumping, followed by the inner circle. These people don’t pay for information, but are likely to be the last tier that stand any chance of making money from the system. After this, there is the paid outer rim, whereby they pay for some knowledge, but they are not getting the same amount as those in the paid inner circle. They are unlikely to turn anything into profits. Finally, you have the outer rim and the bag holders, who try and get in at the last minute to make a profit.
An insider from one pump and dump group managed to get some tips as to how to improve your profits. These included having both your mobile app and the web app open at the same time; split your screen, so you can react quickly; and if you enter late, do not try and market buy. They will however, announce the coin over a series of lines to prevent it being scraped and their coin revealed.
From the image, it is very clear to see the sudden price surge, when the cryptocurrency has been bought suddenly and in the masses, and equally, the slower decline in price, or the dump, where the currency is still being bought, but is being sold much faster. In this case, as you can see by the second image, the target price was never hit.
The truth of the matter is that pump and dump groups are very dangerous. It might seem tempting to get involved and see it as a quick way to make some more money from your investments, but in reality, it is far better to look at the long term, and invest in a virtual coin that you feel will make you money over time, and not just a quick fix.