What Are Pump and Dump?

Pump and dump scams have been around ever since the conception of a marketplace for securities. The concept is that individuals invest a thinly traded asset like a penny stock when its price is descending. While pump and dump scams are illegal within the stock exchange, the planet of cryptocurrencies is essentially unregulated, and people behind the schemes don't seem to be technically breaking any laws.

Are Pump and Dumps Safe?

Pump and dump are incredibly risky, especially if traders can't dump their coins at the correct time. People who acquire can purchase from the underside and sell the coin right at the peak. Pump-and-dump schemes are a type of fraud, and the originators of the scheme conceive of taking money from innocent investors by encouraging them to shop for an asset based on false information. 

How to Spot Crypto before It Pumps?

Here is a list of key factors you need to take into consideration before choosing a coin for investment:

Listing the potential candidates:

Listing the potential candidates is the foremost step to finding a crypto pump. Specifically, you need to find a minimum of ten coins or tokens that you think have the potential. Usually, you will find these cryptocurrencies on the second, third, and fourth pages of the coin market cap. Note that the further you go down the coin list, the more risk you’ll face! Check every cryptocurrency you think has potentials and gain more knowledge. Cryptocurrency's price history is the primary factor to consider. The excellent nominees with no irregular price action or concerning gaps in the volume are trending up over the future.

Is It a Coin or Token?

The second important element is whether or not the cryptocurrency in question could be a coin or token, i.e., whether the crypto has its own blockchain or exists on another blockchain. The best candidate could be a coin with its blockchain or a token on Ethereum, Cardano, or Solana. Be extremely careful of any tokens on the Binance Smart Chain or Tron blockchain.

Which Exchanges Support the Cryptocurrency?

The third point is that cryptocurrency exchanges support centralised exchange, trading volume, and market depth, and these can be checked using the market tab on the coin market cap. At least, the ideal candidate is listed on Kucoin, with plenty of trading volume occurring on a collection exchange or other reputable ones and a fair amount of market depth.

Check the Community of the Cryptocurrency

The fourth factor is a strong community around the cryptocurrency, which can easily be measured by checking the coin’s social media, especially Twitter. The ideal nominee will have an enormous following with an engaged community relative to other cryptos with similarly sized market caps.

How Are The Tokenomics?

The fifth and last item is powerful tokenomics, which should contain the following points:

• The total count should not be excessively high because increased supply results in a low value for the token
• There should be enough tokens available so that potential customers can purchase them from you.
• The token's value should be optimal based on the utility it serves.

Once you put together a listing of cryptocurrencies that would jump, the following step is to spot any upcoming events or announcements that would cause them to pump.

How to Predict a Coin Will Pump?

To make things easy, you will be able to divide the nominee cryptocurrencies on your checklist into institutional-investor-driven and retail-driven investments. The most effortless method to recognise a pump and dump scheme is when an unknown coin suddenly rises substantially without a valid reason. It can easily be viewed on a coin's price diagram.

When the Cryptos Pump in Response to Events and Announcements?

Although you can never make sure of the future, and many of the ideas about the future of a certain cryptocurrency are only predictions, there are some ways to make more solid predictions. Here they are:

Measuring How High Those Cryptos Could Go

There are many alternative methods, but the primary check is the market cap of the coin or token you have your eye on. The low market cap means it takes less money to push its price. The lower the market cap, the more room that crypto has to grow, no matter what its dollar value is.

Technical Analysis

The second factor to check is technical analysis, specifically previous support zones, moving averages, and various indicators.

The Final Points to Consider

To nominate a cryptocurrency as having long-term potentials, you should look for some, most, or all of the following elements:

1. There should be a second-hand case or utility for the coin or token that makes constant demand. 
2. The coin or token should be listed on some admirable exchanges like Binance.
3. The coin should have numerous partnerships with popular crypto projects and protocols. If a crypto project has made little to no effort to cooperate and integrate with its competitors, it will have a tough time flourishing in the future.
4. The coin should enjoy a lot of VC funding.
5. The cryptocurrency should show continuous development and innovation because the crypto space is insanely competitive.
6. The last element of crypto with long-term potential is related to the fifth point and is the lack of any severe competition within that crypto niche. It can be because a monopoly on a selected technology or use-case is insanely advantageous, as verified by chainlink, which dominates cryptocurrency's oracle niche.

A Word to the Wise.

The next thing to focus on is to decide what proportion to allocate, when to do it, and when to require gains. It should go without expressing that going all-in on crypto that moves to pump could be a terrible idea, and it is because there's no guarantee. It could begin earlier or later or maybe go down in reaction to the news you're banking on.

Conclusion

As you can figure by now, it’s too risky to just go out and invest in any nice-looking cryptocurrencies. You need to be equipped with the necessary knowledge and details. Crypto world, with its huge whales, is a deep ocean! Before jumping into it, learn how to swim. Here at Cryptologi.st we train you the best methods of swimming in the crypto ocean near the whales! We are no financial advisors but educators who help you make confident crypto decisions. Cryptologi.st will keep you updated about the most important details of the crypto market.