Pump and Dump: Meaning, Definition and How it works?

Pump and dump is a term that’s become all too familiar in the fast-moving world of crypto. While the promise of quick gains and skyrocketing prices can be exciting, not all market movements are as organic as they seem. Behind many sudden price spikes lies a coordinated effort to manipulate unsuspecting investors a classic pump and dump scheme. 

But what exactly does this mean, how does it work, and why should every trader be cautious? Let’s TopCoin9 dive into the mechanics behind this deceptive practice and learn how to spot the red flags before it’s too late.

What is a Pump and Dump?

A pump and dump is a type of market manipulation scheme where the price of an asset—often a low-cap or lesser-known cryptocurrency is artificially inflated (“pumped”) through misleading statements, hype, or coordinated buying. Once the price reaches a desirable peak, the manipulators sell off (“dump”) their holdings, leading to a sharp decline in value and leaving regular investors with significant losses.

This tactic originated in traditional stock markets but has found a new and fertile ground in the crypto world, where regulations are looser and price volatility is much higher. A pump and dump scheme typically targets emotionally driven or inexperienced investors who are lured in by the fear of missing out (FOMO) on a “hot” opportunity.

In the crypto space, pump and dump schemes are often orchestrated through private chat groups on platforms like Telegram, Discord, or Reddit. How does Pump and Dump work? Please continue reading below.

How does a Pump and Dump Scheme work in crypto?

In the cryptocurrency market, a pump and dump scheme is often carefully organized by a group of individuals or influencers who hold large quantities of a particular coin—usually a low-cap or unknown token. These schemes typically unfold in several calculated steps.

Stage 1: Preparation and Accumulation

The organizers quietly accumulate a significant amount of the chosen coin at a low price, often with little to no public attention.

Stage 2: The Pump

Once they’re ready, they begin to promote the coin aggressively through social media, Telegram groups, Discord servers, and even fake news or celebrity endorsements. This sudden flood of hype creates FOMO, encouraging unsuspecting investors to buy in as the price begins to rise rapidly.

Stage 3: The Peak

As buying pressure increases, the coin’s price spikes. This is the “pump” phase where momentum and hype take over, and trading volumes surge.

Stage 4: The Dump

At the peak price, the organizers start selling off their holdings, cashing out at inflated values. This sudden wave of sell-offs triggers a massive drop in price—often within minutes or hours—causing late investors to suffer heavy losses.

Stage 5: Aftermath

The price crashes, the hype disappears, and the coin returns to obscurity. Meanwhile, the organizers walk away with profits, and retail investors are left holding worthless bags. 

These schemes are highly unethical and, in many jurisdictions, illegal. However, due to the unregulated nature of many crypto platforms, they continue to occur with surprising frequency. So how real is this threat? Let’s look at some real examples of pump and dump in crypto to see just how damaging these schemes can be.

Real examples of Pump and Dump in crypto

Pump and dump schemes have plagued the crypto market for years, especially during periods of hype and rapid speculation. These deceptive tactics often target low-cap coins that appear attractive to inexperienced investors. In many cases, people mistake them for the best crypto to buy now, only to realize too late that they’ve been caught in a trap. Below are some well-known examples:

Verge (XVG) – December 2017

In late 2017, Verge (XVG), a privacy coin, experienced a massive price surge after rumors spread on Twitter and Reddit about a major upcoming partnership. Coordinated groups pumped the token, pushing its price from around $0.01 to nearly $0.30 in just days. Shortly after reaching its peak, the organizers dumped their holdings, causing the price to crash and leaving thousands of investors with losses.

Pump and Dump Telegram Groups

Several Telegram groups like “Big Pump Signal” and “Crypto4Pumps” have been known to organize mass buy-ins of obscure coins. These groups would announce a target coin seconds before the pump, giving group leaders a huge head start. Coins such as CloakCoin, VCash, and others have all been targeted in such events—some gaining 300% in minutes before crashing violently.

Elon Musk-Inspired Meme Coins

In 2021, several meme tokens with names referencing Elon Musk—like “ElonMoon” or “SpaceX Token”—were pumped on social media platforms. These coins had no utility, no roadmap, and no real development. Once enough hype was created, early holders dumped their tokens for profit, causing losses for late buyers who mistook the joke for a serious investment opportunity.

These real-world cases show just how damaging pump and dump schemes can be. But beyond the financial devastation, there’s another layer to the problem why are these schemes considered illegal or risky in the first place?

Why are Pump and Dump Schemes illegal or risky?

Pump and dump schemes are considered both illegal and highly risky for several reasons—most of which revolve around market manipulation, investor deception, and a complete lack of transparency.

• Market Manipulation: At their core, pump and dump schemes are designed to create an artificial sense of demand. Organizers use misleading or false information to inflate the price of an asset, then sell off their holdings at a profit. This distorts the true value of the asset and disrupts market integrity.
• Violation of Securities Laws: In many countries, pump and dump activities fall under securities fraud. Regulatory bodies like the U.S. SEC (Securities and Exchange Commission) consider this type of behavior illegal regardless of whether it happens with traditional stocks or crypto assets. While crypto regulations are still evolving, the legal framework is increasingly being applied to protect investors from such scams.
• High Risk for Retail Investors: Retail investors especially newcomers, are often the biggest victims. Lured in by hype, fear of missing out (FOMO), or promises of quick profits, they buy in at inflated prices and end up holding worthless coins once the dump occurs.
• Loss of Trust and Market Reputation: Repeated pump and dump incidents can erode trust in the overall crypto ecosystem. New users may become discouraged, believing the space is filled with scams and manipulation, slowing adoption and long-term growth.

So, how can you protect yourself from becoming a victim? Let’s explore the next critical topic.

How to identify and avoid Pump and Dump Schemes

Avoiding pump and dump schemes in crypto starts with understanding how they work and recognizing the red flags. While these scams can be sophisticated, they often share similar patterns and behaviors.

Sudden, Unexplained Price Spikes

Be cautious of coins that experience a sharp increase in price and volume within a very short time—especially if there’s no clear news, product update, or fundamental reason behind the move.

Overhyped Promotions on Social Media

Schemes often rely on aggressive marketing campaigns across Telegram, Twitter (X), Discord, or TikTok. If you see influencers or anonymous accounts urging you to “get in now before it’s too late,” be skeptical.

Lack of Transparency and Real-World Use

Many tokens involved in pump and dump schemes have no clear roadmap, team information, or utility. If the project has vague whitepapers or anonymous developers, it’s a red flag.

Suspicious Community Behavior

If a community discourages questions, bans criticism, or over-promises returns, it may be part of a coordinated manipulation. Real projects welcome healthy skepticism.

Tips to Stay Safe:

• Do your own research (DYOR): Always investigate a project’s fundamentals.
• Avoid FOMO: Don’t invest based on hype or fear of missing out.
• Check trading volume: Low liquidity tokens are easier to manipulate.
• Use trusted platforms: Stick with exchanges that enforce listing standards.

By staying vigilant and informed, you can significantly reduce your chances of falling victim to a pump and dump. But interestingly, the term “pump and dump” isn’t always used in a financial context… So what other meanings does Pump and Dump have? Please continue reading below.

What does “Pump and Dump fortnite” mean?

While the term “pump and dump” is commonly associated with financial fraud in crypto or stock trading, it has also made its way into gaming slang—particularly in the Fortnite community.

In the context of Fortnite, “pump and dump” refers to a fast attack combo strategy involving the Pump Shotgun (often referred to simply as “Pump”). Here’s how it works:

• A player quickly fires a shot with the Pump Shotgun, which deals heavy burst damage.
• Immediately after firing, they switch weapons or build/move away—essentially “dumping” the engagement after delivering the initial blow.

This playstyle became especially popular in competitive Fortnite and high-skill lobbies, where quick eliminations and fast weapon swaps are essential. Some players also use “pump and dump” to describe hit-and-run tactics, where they engage an enemy briefly, deal damage, then disengage quickly before retaliation.

Now that we’ve explored both the financial and gaming interpretations of “pump and dump,” let’s wrap up with a few final thoughts on how to stay informed and safe in the world of crypto.

Conclusion

Pump and dump schemes are a serious threat in the crypto world, especially for new investors chasing quick profits. Understanding how they work, recognizing warning signs, and staying informed are essential to protecting your investments. Whether you’re exploring new tokens or just researching the best crypto to buy now, always prioritize transparency, utility, and long-term value over hype.