Pumping and dumping cryptocurrency?

The view of a group on the inside

Once in a while, the group of thousands of users decide to purchase at the same time one small, insignificant altcoin. It usually takes place at 2 PM ET. After several seconds, when the value of this altcoin goes higher than anyone could expect, they resell them, making profits and at the same time becoming cryptocurrency bandits.

This is how the so-called “pump groups” operate. The team of altcoin purchasers, who think that they won lottery. However in fact, it appears that they usually lose, and they lose quite a lot.

“Pumping consists in purchasing little known cryptocurrencies, the so-called altcoins at the particular time by a huge number of cryptocurrency investors” – this is the message that a user receives while entering a pump group called The Alt Pump. The chat they have on Discord has got more than 30k active users. “The group allows you to participate in a huge event, where many people make purchases together with you. Thanks to that, the value of the purchased altcoin will increase significantly. Once it happens, we begin the process of dumping. Dumping is nothing else but selling previously purchased altcoins when their prices are extremely high because of the pump.”

The creed of such groups is rather simple and straightforward – purchase for less, sell for more. It is because many people, who are actually not the part of this group, may purchase these altcoins once they notice its rapid value. The reason why they would consider doing it is because of the tendencies of Bitcoin. The most popular cryptocurrency in the world had many major spikes in values that resulted in gains of more than 30% within several days. In addition to that, there were hours, where one could notice the rise of the value for more than 50%!

The most important rule for a good pump group is to offer quick and almost guaranteed profit. It doesn’t matter if the terms are reasonable or not. You may find the assurances that you will get “300% return of the investment”, but there are also people claiming that in a minute you will “get your own lambo!” Places, where such groups are most often promoted are social media like for example Facebook, Twitter, Instagram. However, they most often communicate with the use of Telegram, Discord, or any other external group with voicechat functions. Noteworthy is the fact that in many cases users stay anonymous or partially anonymous – even the administrators of these groups.

How does this scam really look like? Well, it all begins with making a group itself. From what we learned, there are groups with 2000 users, but the most popular ones consist of 200 000 people, trying to make some profits. Once the group is formed, the author looks for small and insignificant altcoin. Once the host provides you with the name of the cryptocurrency and the target price he or she wants to achieve, the rest is up to users. Usually, the whole process looks like a fight for survival. It means that even if the price doesn’t reach the target, people tend to sell in no time just to make sure they do not lose. Because of that, it is more like a free for all rather than organised purchasing and selling.

Surprisingly, the process of pumping seems to be very well organised, especially if we take a closer look at the biggest, most popular groups. Of course at first the group needs to be created, so if there is a new group, the administrators starts to promote it anywhere he or she can. In case of already established group, the administrators prepare an instruction that will include the time when the pump begins. Before the start, the users are provided with more and more specific information like for example the exchange, where particular cryptocurrency can be found, and some other details. When the time comes to pump, the administrators release an information and then everyone tries to earn.

Besides the already discussed aspects of pumping and dumping, it is worth to note that users participate in variety of different activities like for example promoting coins. This is particularly important, especially if we want to increase the hype around one altcoin. Thanks to that, new users who are looking for investments will get interested in a coin that is getting pumped. However, in most cases the pump lasts too short for any advertisements to do any good. It is because of the panic of some of the investors, who tend to sell altcoins before reaching the target. If you wish to see how this scam works, take a look at the below chart, which depicts two of Big Pump Signal’s pumps.

Looking at the example of Russian altcoin known as GVT, we can see how a cryptocurrency with a value estimated at $30 happened to be $45 after 9 minutes. According to CoinMarketCap, a website that collects data about many different cryptocurrencies, 34 seconds before the signal was given for pumping GVT, its value was $24.22. Once the signal was out there, it took 4 minutes and approximately 16 seconds for the value of GVT to reach $35.05. Nine minutes and sixteen seconds after the signal was released its value peaked at $45.11. It means that if you were to invest $1000 at the beginning, you would receive $1511 from the investment. However, these numbers represent the luckiest situation, where you would start right after the signal was given and you would sell GVT in a randomly selected situation with the afore-mentioned peaked value.

In another case, the pump of BNT to be precise, we can notice a bit different statistics. This altcoin was created by the B protocol foundation in 2017. Forty seconds before the signal was released, the value of BNT estimated at $7.91. CoinMarketCap says that after four minutes and fifteen seconds its peak was at $9.67. After that, it dropped heavily, even lower than the starting point before the signal. It means that you would earn around 22%, provided you were to purchase BNT right after releasing the signal and you would sell it at the peak.

According to an alt coin expert, Chris Koerner: “Most of the people, who participate in pumping and dumping, lose their funds and they think that they waited too long to sell it. Because of that, they want to try again, and again, and again”. During his interview by the phone, he also indicated that there are pump groups that require from you an entrance fee. Because of that, no matter how the pumping/dumping goes, the administrators of the group will always profit from the event. “This is like an addiction – you invest more and more money until there is nothing to invest anymore. The organizer of the pump is always at advantage, since he not only profits from the entrance fees, but also from the fact that he can purchase the altcoin before the signals begin and sell once they notice any rising movements.

There are also different levels of memberships and they all depend on the amount of people you invite to the group. It means that if you prevail in affiliate system, your rank will be high. As a result, you may have the access to crypto signals before anyone else. Besides inviting many people to the group, it is also possible to acquire premium membership by simply purchasing it from the administrator. As a VIP member of the group, you can receive a signal faster than others – depending on the group the difference is from half a second up to three, even four seconds.

One of the active members of very popular pump groups on the Discord chat says that: “in most of the cases, these are spams and scams to take your money”. Most users hear about groups from social media spams, and the same happened to our user – Brad Spann. At first he became interested in the idea: “after getting into the group, I was flooded with links redirecting me to other pumping groups just so they could level up and get an extra half a second before the next pump starts”. A great example of how affiliate system works can be presented by ‘MEGA Pump – Cryptocurrency Investment Group’. There are over 30k members on Discord and 12k users on Telegram and the system looks like this:
Even if several seconds seems not very much, in fact it really matters. Unexperienced person may not know that, but in the world of fast-paced pumps and dumps, where every second matters, the possibility to purchase altcoin earlier than everyone else (and therefore cheaper) is essential for proper earnings. There were many situations, where people were to lose their money because they didn’t manage to purchase altcoin in seconds after revealing the signal. Most of the groups say that it is caused by bots, which are purchasing and selling large amounts of coins almost instantly. In other words, you can easily lose all your money if you do not belong to the elite.

For most of the users tiered system with ranks and levels doesn’t seem to be fair. In consequence, there were groups that wanted to change that and introduce equal cryptocurrency predictions for everyone. However, in the end the organizers of these group want to profit and therefore even if they introduced some changes in tier system, the users who invited others were taken into account during giveaways and ruffles. Because of that, there were always people, who received special attention and profited from affiliate system.

It doesn’t take long to find messages and comments about some recent pumps suggesting huge losses to all people, who were not having any higher ranks. There are people saying that they encountered “not a good pump”. Other guys claim that they received a signal after the altcoin skyrocketed with a value, resulting many people in losing their funds. Although this technique has been popular for quite a long time (at least since 2017), the popularity of it is keep improving. The best proof you can find on the Internet are the groups themselves that were founded several months ago and they already consociate thousands or even dozens of thousands of users.

Although this is a clear case of FOMO usage (the fear of missing out), there are still a lot of people who are willing to take their chance in this shady investment opportunity. As a result of huge Bitcoin fluctuations (and hence fluctuations of other altcoins), everyone is interested in entering the cryptocurrency market, which seems to be a magical place for most of them. It is worth to note that some people, including Korner, believes that one of the reasons why people overestimate their potential at cryptocurrency investment is because of the lack of any financial knowledge. “People are exploiting the fact that some of the novices do not have any experience nor knowledge regarding the stock market”. Most people do not understand that “there needs to be a demand for the product you are selling. If there is none, you are most likely to lose”.