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As you might have seen, we have a popular post about Telegram Crypto Signals groups. Once you dive into the search for crypto signals on Telegram, you will find your way into Pump and Dump groups – sadly, there is no way around it. Recently, they called themselves “Pump and Hodl” to cloak their shady intentions. One thing to remember: There is nothing like a free service that will make you rich instantly. Not in crypto and not anywhere else. You will burn your fingers if you put it on the hot plate, and this article will protect you by showing you how smart traders even exploit the pump-and-dump scheme a bit.
This article is about:
- Clarifying what a Pump and Dump is
- How Pump and Dumps work on Telegram groups (and why you will always get dumped in free groups)
- Understanding the anatomy of a Pump and Dump
- Identifying Pump and Dump groups on Telegram to avoid them and to protect you from getting burned
- Knowing about upcoming Pump and Dump coins – even before the actual pumpers know those coins themselves
- A Conclusion About Pump and Dumps
But first things first – Let's clarify what the term “Pump and Dump” actually means:
What is a Pump and Dump?
A Pump and Dump is a planned market manipulation of low-volume coins, exploiting the opportunities young crypto markets offer. Whilst many people believe that the financial markets move in some kind of random way or are influenced by the mass psychology of investors, most prices are gamed. You can see this in the traditional markets for ages, but it is way easier in the juvenile crypto markets.
So many shitcoins that nobody cares about anymore or even knows about, but they're still tradeable. These coins now have significant trading volume and are way too easily manipulated by trading groups on Telegram or by real whales who move in and out, leaving a mess of burned traders behind. Manipulation is omnipresent, especially in the world of crypto, as there are too many easy chances to do so. Recovering lost cryptocurrency assets has become a major focus for many traders who fall victim to these manipulative practices. As the market continues to evolve, individuals are seeking ways to safeguard their investments and reclaim what they've lost. Tools and platforms that assist in this process are gaining traction, offering hope to those affected by the volatile landscape.
To sum up
A Pump and Dump is an organized form of market manipulation, often orchestrated by multiple Telegram “signal groups” to pump up a dead shit coin that barely moves. They start depositing money in these low-value coins. The groups spread unimportant upcoming news of that shitcoin as a reason why it goes up.
The issuers behind the Pump and Dump accumulated and set up their positions early; then they start, together with the community, the actual pump. The signal to the user of the free channels will be given once the coin is already pre-pumped. The novice traders see a sharp rise and big green candles and want to jump in, but the group behind already pulls out and uses the traders' buy orders to get their sell orders filled fast. At the end of the action, many new traders will have bought the top of the candle and will be left with a big bag of a dead shitcoin, while the pumpers profit.
How Pump and Dump groups operate on Telegram
The operation works as follows: A few admins of large Telegram groups for “free signals” unite and try to establish collaborations with other Telegram group owners to broaden their audience and maximize the impact of their pump-and-dump group. They search for a shitcoin with certain qualities that qualify it for a pump-and-dump action (we will show you that later in this article), analyze which one is the easiest to pump, and then vote internally on a selection. Usually, they take coins that are not among the Top 75 (CoinMarketCap / trading volume) and show a prolonged decline in value.
The pumpers often have paid groups, stacked by entry fees. Paying higher fees gets you in the “accumulation group,” which lets you buy the coin in the accumulation phase, completely unpumped. The cheaper groups get you an account that will notify you about pumps in a later phase, where the price has already gone up. Basically, they will be notified with the pre-pumped coin and will be able to get in early, but not with the full advantage of the pump.
The Introduction to Buy
The instruction is to buy in small stacks, often with a max of 0.2 BTC or less, so the coin does not look pre-pumped to other traders. Within the completely free channels, you will now see bot-posted messages like “Next Pump & Hodl Signal in 15 minutes” across many of those channels. 5 Minutes before the start, they often begin with the almost golden line, “Log in to your Binance.” At this time, the guys behind the Pump and Dump action have already accumulated large sums very slowly; after that, paid members have been allowed to fill their bags. You, the free channel user, are the one who pays the profits for the others.
Now, the cooperating channel admins who spread the signal to their members have the opportunity to participate and buy another large amount. When the signal is finally posted across all those signal groups, you will see a huge artificial green candle. The pump signal will be posted in all those channels (often with impressive member counts, by the way) at the exact same time, and the free signal group members buy this shitcoin like there is no tomorrow. The price increases in the short term, but the pumpers already agreed upfront to a particular percentage increase, usually 20-30%, when they are going to dump it. Congratulations, you have been dumped.
The Anatomy of a Pump and Dump
Pump-and-dumps follow a replicable methodology. The preparation requires some footwork first, and the pumpers usually go through the following steps until the final dump. It is like the blueprint for most of the pumps and dumps:
Step 1: Accumulation
We talked already about the accumulation phase we are going through to build up our positions in general. Not mean we are doing that to participate in a pump-and-dump, though there are similarities in how pumpers do this. Pumpers want their action to be cloaked so the price doesn't drive up before the actual pre-pump and pump. They open hundreds of tiny micro buys to build their position over time, trying not to generate chart spikes. If the coin volume is very low, these spikes will be unavoidable, as position building would take a very long time.
On low-volume coins, spikes will appear in the preparation phase, giving pumpers an advantage to shake out bagholders (as they are happy the price is increasing and can get rid of the shitcoin) and increase their market share. Furthermore, the pumpers use fake walls to prevent the price from rising too quickly. We explained fake Buy / Sell walls here. Basically, the pumpers put up huge, unfilled sell orders, so the order book looks like the price could dump hard at any time. This will scare other traders and prompt them to sell, allowing the pumper to buy more of the coin at a discount.
Step 2: The Test Pump
Before the actual pump, there are often a few test pumps. This is done to test out the markets; the pumpers want to make sure that they are in control. Pumpers want to get a sense of where possible resistance could be and what the overall sentiment of other holders is (like, are there many weak hands in these coins?). This is also another reason why they not only test pump but also dump the price a few times before the pump – weak hands must get shaken off first to get more market share at the lowest possible price.
Step 3: The Shakeout and the Pump
Often, pumpers are getting pretty aggressive with shaking out the weak hands. We have a perfect example where the price has been driven from an almost all-time low to an all-time high – at the same candle. Nuts, isn't it? It is just another example of why crypto is not for the fearful.
Do you see what happened at this candle? The pumpers don't care about bringing the price to hell, as they know their social trading power and/or their bankroll is big enough to bring it back up anytime. So, to them, it is a limited risk. But all the unknowing traders get scared and sell. All the scared traders are getting stopped out, even with their most liberal stop-loss levels. Now imagine you got the signal to purchase this coin while the candle grew already very much, your order didn't get filled, and you are panic buying the top of that candle – you are recklessly buying.
Step 4: The Dump
The pumpers use several strategies to exit their pump. It is important to know that they will get their profits from you guys, who are buying at the top of the candle because they are following late pump signals on Telegram or other sources. The pumpers have set up micro-sells all along the pumped candle, or they dump into a buy wall; they see. There are much more advanced methods available to them, like repeatedly buying into their own walls to create more FOMO, and once people start buying, they buy into the already set-up sell walls to exit the pump in small steps.
How to identify Pump and Dump Groups on Telegram
Log in to Binance… Signal in 5 minutes
If you read a line like this – unsubscribe from the channel, simple as that. This phrase is used by most pump-and-dump channels, and sooner or later, you will take hard hits to your funds with this kind of advice. You are the last in the line, the guppy in the shark tank. But let's take a wider swing. “The Internet – oh, you universe full of free things…” Maybe not as free as some people might think. Most free services have hidden fees. Take Google, take Facebook – you pay by contributing your data to the big data pool.
Most of the free signal channels will make you pay with your lost funds; you indirectly pay the pumpers by being dumped. Some free channels also offer a paid channel, and they often share a fraction of their signals with a slight delay, without fees. You will be advertised with cross-promotions, and once you get into that cycle, you will end up in a pump and dump channel – be aware.
Here are some indicators that you landed in a Pump and Dump channel:
- They use a timer for the next signal and write something like “next signal in 60 minutes”, “Login Binance now!” and so on, you name it.
- The published signals are for coins you have never heard of in general.
- Once you open the chart, you see many tiny candles, followed by a big candle, and the suggestion to buy into this candle.*
- They post some news about that coin that might seem unimportant. It is a pseudo reason for the sudden rise.
- They push you hard to hold that coin no matter what comes, making sure their sell orders get filled.
- They push you to spread this news in social media.
- You see the same signal posted in many channels.
- They don't share any technical analysis at all.
*Keep in mind that a similar picture can appear with legit coins. If a real breakout happens, you can jump into to ride the wave, though it is unlikely that this happens for the shitcoins they use for their pumps.
How to earn from Pump and Dumps without actually participating in it?
Despite there being several scanning bots that run volume checks and look for buy/sell patterns to alert you, there are ways to manually scan for potential upcoming pumps. We don't advise using this method, as it is risky, but we're sharing it here with you because many traders use it to profit from pump-and-dumps without being part of them, or even knowing about them.
Just like in “The Art of War,” you have to see the fight with the eyes of your enemy, think as he thinks, and abstract his moves to exploit it. Pump and Dump groups are following a methodology on how they select their coins, and what we explain here is how to find out what these coins could be – maybe even before the groups know it themselves. If you decide to try this out (which we do not recommend), you should go very small.
You need strong hands and sometimes lots of patience until the action starts. Hodl & patience are far easier when you don't have your life savings within the trade, but just a fractional amount you can afford to lose or end as a bag holder.
Time To Get Spoon-Fed: These are the 10 steps an experienced trader uses to earn from pump and dumps before the pumps start:
- Open the Biggest Losers on Coinmarketcap.com (scroll down to see them)
- Change the currency from USD to BTC
- Change the last column to 7 days
- Open all coins with a volume between 10-20 BTC in a new tab.
- Check against the normal Coinmarketcap Rankings, the coins must not be in the Top75. Close the tabs that have a higher rank than #75
- Now see the charts for each of them in the 30-day range. Close all tabs where the charts show spikes exceeding 10%.
- You should come up with a list of 5-10 coins at most.
- Now, you have some really low-sitting coins with low volume and no recent pumps. That is what pumpers are looking for. Traders that want to exploit that knowledge spread some funds over the analyzed coins and just wait. Commonly, they should get pumped within the next 10 days.
- Some set a stop-loss of up to 5% depending on their own risk-taking propensity.
- You are looking for a 20 – 30% percent growth to make a profit.
The Anatomy of a Crypto Pump and Dump – SUMMARY
Pump and dumps are dangerous if you are not in the inner circle planning and executing them. Some groups allow early access to these pumps, usually for a steep fee. Still, there's a risk that these pumps won't work out. We talked about how free signal channels are mostly not free, and that there's a high risk of falling for a pump-and-dump group on Telegram if you join randomly through cross-promotions.
You now know the red flags to recognize those groups early and learn in depth how pump-and-dumps work / what the scheme behind them is. We also saw how pumpers choose their coins for pump-and-dumps and how some traders exploit that methodology to position themselves early in such pumps. Identifying common cryptocurrency frauds can help traders protect their investments. By staying informed about prevalent scams, individuals can avoid falling victim to schemes such as Ponzi schemes and phishing attacks. Awareness is key to navigating the complex landscape of cryptocurrency and ensuring a safer trading experience.
Conclusion
Pumps and Dumps are an art form in their own right; however, they are a shady art that leads to losses for novice traders. In the end, trading is a zero-sum game – if you take part, you have to be able to take a loss. Pumps and Dumps, though, exploit the unknowing, leaving them with no chance. No technical or fundamental analysis will help you once the pump group dumps on you.
It is good advice to stay away from low-volume shitcoins unless you know what you are doing. If you are into a legit coin, all you need to do is hold; once you are at a loss, the odds are that they will return and even increase. If you are in a shitcoin, odds are that the value will dry out more and more. So stay aware, stay careful. Check out the video below to see the anatomy of a pump-and-dump.
