Topic: Please explain Pump N Dump to a newbie (Read 497 times)

0. xcoin starts low.  

1. pumper buys the xcoin for low, accumulate enough xcoins to manipulate the market. miners can either premine or initial mine at low difficulty to obtain a controlling amount of xcoins (e.g. coinye was no-premine, but the dev initial-mined half a billion coinye b4 they decrypted the wallet for everyone else)

2. pumper starts selling xcoins high, encouraging other people to do so.  it helps if you announce "i'm pumping!" to get people excited about this. (e.g. usually people say things like "hold xcoin!!! it's going places!"  or "xcoin is undervalued!")  

3. once enough people start buying in, the 'pump' gains momentum.  at a certain time, pumper starts 'dumping' everything at the highest price.

4. people that do not know that the 'dump' is taking place continue to buy xcoin at high price at the same time 'dumper' is 'dumping.  

5. as long as the pumpndumper sells first, they get the largest slice of the profit - the very peak of the rise.  

6.  where does the money come from, where does it go?
  
a. the money the 'pumper' gains is from the people that bought his coins at a higher price than the pumper paid for.
b. the profits made are on the backs of the people that were duped by the pump-and-dump, because they are convinced xcoin's price rise reflects a legitimate rise in value. in reality xcoin is just being manipulated for a short time, and only to directly benefit the pump-and-dumper.
c. after xcoin is 'dumped', the 'pumper' is left holding everyone's $$, and the people that bought in during the pump get left holding a whithered husk of xcoin.  

7. what happens to the xcoin?  pumper doesn't care.  if it dies, it dies.  if it keeps going, wait a few days/weeks and then repeat.  

the suckers/marks get into the 'pump' because they are also speculators, and they feel they can get rich very quickly.    however, the pumper has information asymmetry on his side:  only the pumper knows when the pump starts, and when the dump starts.  knowledge of timing is everything in a pump-and-dump:  dump 5 minutes too late, and you've missed the peak, and buy 5 minutes too late, and you're paying too much for the coin.

the smaller the market cap of xcoin, the easier it is to gain a controlling share of xcoin, and the easier it is to manipulate.  premining or not doesn't make a difference; you can pump-and-dump a coin with no premine as long as you can have enough xcoin to manipulate the market.  

the simplest way to avoid a pump-and-dump is to simply avoid being seduced by the get-rich-quick.  if you take a long term strategy and invest in a coin with good market position and fundamentals, you'll treat get-rich-quick schemes as short term scams.  avoid arguments based on emotion, and instead invest only in what makes sense from an economic standpoint.  

https://bitcointalksearch.org/topic/january-14th-todays-list-of-shit-and-scam-coins-ed-1-416541

I like to add that even some long term coins this happens to.  we can go though the list and I bet you 97% of the coins have done that. Not that I mind some pre mine and the devs making some money of course... withen reason though.

basicly creating a coin and pre-mine it... pump it with promotion and announcement so people with support and mine it... once you have enough support to get it listed on an exchange, sell millions first so by the time people post they low volume on the exchange the price already drops from 150 satoshi to 0.5 satoshi and don't promote the coin and let it be now that you make your money.

basically not trying to make your coin the top 10 listed and increase it's value long term

So I'm new here I'm looking at 100's of alt coins I'm not clear on the pump n dump scheme what are they doing they get a million coins for themselves then try to get buyers who are then what ? owning the coins but can't use them for anything? How much can they make from doing this? What's in it for the buyers what's he hoping for?

I'm not clear on this someone must be making money or we would not have all the alt coins? Am I missing something?