A pump and dump occur when a trader or investment firm buys a large amount of an asset—sometimes illegally—and then promotes, or “pumps,” the underlying asset with misleading information in order to entice unsuspecting investors to invest in order to increase its value. Shortly thereafter, they “dump” (sell) the asset at a higher price, resulting in losses for subsequent investors. This is common in crypto markets when a whale purchases a large quantity of a specific crypto asset, causing the price to rise. This attracts additional investors, raising the price even higher and allowing the whale to profitably “dump” his holdings.
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