What is pump and dump in the cryptocurrency market?

During the bear trend in the cryptocurrency market, accusations of pump-and-dump schemes are being voiced more often, so let’s examine what these schemes are and what consequences they bring.

During the bear trend in the cryptocurrency market, accusations of pump-and-dump schemes are being voiced more often, so let’s examine what these schemes are and what consequences they bring.

What is meant by pump and dump in the digital asset industry?

A pump and dump is a fraudulent scheme consisting of two stages. First, the organizers artificially inflate the value of a cryptocurrency. Then, when the price of the coin reaches a certain level, they unload their digital assets, thus earning a substantial profit and collapsing the price of the virtual currency.

Pump-and-dump schemes are characterized by:

• attempts to manipulate investors by creating a false impression of a project’s reliability and prospects;
• promoting a speculative asset with limited trading history;
• creating hype on social media;
• involving inexperienced market participants;
• cultivating fear of missing out (FOMO).

How to identify a pump and dump in the crypto market?

The main indicator is a rapid price increase without obvious reasons. For example, in late September 2025 the privacy coin Zcash (ZEC) began skyrocketing and gained more than 13× in 40 days. After reaching a peak, the price dropped by 43%, then rebounded and fell again.

The rise and fall of Zcash.

The price increase was attributed to growing demand for anonymous cryptocurrencies due to stricter regulation. However, other privacy coins did not experience such a capital inflow. Therefore, well-known trader James Winn called the situation a classic pump and dump orchestrated by influencers.

Winn did not mention names, but everyone understood he was referring to the main ZEC bull, Arthur Hayes, who actively promoted Zcash on X. Hayes fueled suspicions by writing:

“Maybe I bought some Zcash, maybe I didn’t. The fact is, you’ll never know. Hide your ZEC and join me in Heaven with our lord Satoshi.” — Arthur Hayes

If Winn is right and Zcash becomes the victim of a dump, its price will collapse soon. From the November peak it has already fallen by 23%.

What is a rug pull?

A rug pull is a form of fraud in which a startup’s team runs away with investors’ money. When project employees participate in artificially inflating the token price, a rug pull becomes a subtype of a pump-and-dump scheme conducted by the developers themselves.

A striking example is the scam conducted by the creator of the meme coin Libra (LIBRA), Hayden Davis. He convinced the president of Argentina, Javier Milei, to promote the token right before trading began. When the capitalization exceeded $4 billion, Davis and his partners sold the crypto and pocketed at least $87.4 million.

The rise and crash of Libra.

How do people profit from pump and dump schemes?

Organizers of pump-and-dump schemes profit because regular traders take the risk of buying highly volatile assets. The reason even experienced traders ignore the danger is the potential for extremely high returns if they manage to sell the cryptocurrency in time.

In practice, tokens subjected to pump-and-dump manipulation typically fall by 90% or more within a week after the scammers unload their holdings. Therefore, digital assets must be sold immediately if there is a sudden surge in trading volume. Determining the right time to buy is much harder, as charts cannot precisely predict how long the bullish rally will last.

What is the main problem?

Pump-and-dump schemes are usually executed within hours after a new token is listed on centralized exchanges. For example, Official Trump (TRUPM), the meme coin associated with U.S. President Donald Trump: it was listed on Crypto.com on January 18, gained 306% within 24 hours, and then crashed just as quickly. Only early investors who sold before or right after the appearance of a massive red candle made a profit. Those who expected the rally to resume were left empty-handed

The Rise and Fall of TRUMP Meme Tokens

How to avoid falling victim to pump-and-dump schemes?

To minimize the risk of losses:

• Be cautious when buying assets whose price rises too quickly;
• Research the blockchain project before investing;
• Read comments and reviews on social media;
• Track token statistics.

Platforms like CoinMarketCap provide essential data: market cap, trading volume, number of holders, distribution, and more. A major red flag is high token concentration — for example, 80% of TRUMP meme coins are stored in a single wallet.

Rise and fall of TRUMP meme-token prices

Low trading volume and small market capitalization should also raise concerns, as they make price manipulation easier. However, even strong metrics do not rule out pump-and-dump risks, as shown by Official Trump, which reached a $27 billion market cap at its peak.

Editor: Alyona Nabok

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