Pump-and-dump, wash trading, paid shilling and signal groups
How market manipulation works in crypto: pump-and-dump schemes, fake volume from wash trading, paid influencer promotion and signal groups.
Not every trap steals your coins directly. Some trick you into buying at a bad price so that someone else can sell to you. This is market manipulation: deliberately creating a false picture of price or demand.
Pump-and-dump
In a pump-and-dump, a group quietly buys a small, cheap coin. Then they hype it everywhere: "This coin will go 100x!" New buyers rush in and the price shoots up. That is the pump. The organisers then sell their coins into that buying. That is the dump. The price crashes, and late buyers are left holding losses.
Organisers buy a tiny coin at 0.010. They announce it to a large chat group at a set time. Buyers push the price to 0.030 within minutes. The organisers sell at 0.025 to 0.030. Twenty minutes later the price is 0.008. Someone who bought 300 USD worth near the top now holds about 80 USD worth.
Wash trading
Wash trading means buying and selling the same asset with yourself, or with a partner, to create fake trading activity. It makes a coin or exchange look busier and more popular than it is. High volume (the amount traded) can make a coin look trustworthy, so fake volume misleads buyers.
Be careful with volume rankings on unknown exchanges or for tiny coins. Large volume with very few real holders, or volume that is suspiciously steady, can be a sign of wash trading.
Paid influencer shilling
To shill means to promote something, often while hiding that you are paid or that you own it. Some influencers are paid by projects to praise a coin, or they buy first and sell to their followers. Rules in many places require paid promotions to be disclosed, but not everyone follows them.
Signal groups
Signal groups are chats, often paid, that post "buy this now" calls. Some are honest but simply not skilled. Others are pump-and-dump schemes in disguise: the admins buy first, then send the "signal" so members provide buyers. Paying for signals also adds cost without proven results.
If a stranger tells you exactly what to buy and when, ask yourself who sells to you when you buy. Often the answer is the person giving the tip.
How to stay out of it
- Be very cautious with tiny coins that suddenly jump with no clear news.
- Treat "next 100x" claims as advertising, not analysis.
- Look at how many holders a token has and whether a few wallets own most of it.
- Make your own plan before you trade, including a stop-loss and a small position size.
With virtual USD (no real value) at /app/trade, write down a plan before each practice trade. Notice how a plan protects you from chasing sudden spikes.
A free account tracks lessons, unlocks the quizzes and gives you 10,000 virtual USD (no real value) to practise with.