What is a pump and dump in crypto?

A pump and dump is a form of market manipulation in which the price of a cryptocurrency is artificially driven up in order to then be sold off at a profit. It is one of the most persistent forms of fraud in the crypto market and has already harmed many unsuspecting investors. In 2026, these schemes are more sophisticated than ever due to the use of AI-driven bots and deepfake promotions of well-known figures.

In this article we explain how a pump and dump works, which signals point to it and how you can protect yourself as an investor. Because in a market that moves 24/7, recognition remains the very best defence.

In short

• A pump and dump artificially drives up the price through hype in order to then sell off en masse.

• The organisers (insiders) make a profit, while latecomers are left with worthless tokens.

• Telegram, Discord and "finfluencers" are often used to create a false fear of missing out (FOMO).

• Coins with a low market capitalisation and little trading volume are the most vulnerable.

• Since the full introduction of the MiCA regulation in 2026, market manipulation is explicitly punishable in the EU.

• Via Coinmerce you trade on a transparent and regulated platform that only offers vetted projects.

What is a pump and dump?

A pump and dump scheme is a coordinated action in which a group of people buys up a large quantity of a relatively unknown or low-quality cryptocurrency. They then spread positive messages, false rumours and exaggerated claims to get other investors excited.

Demand rises, the price rises with it, and the project suddenly seems to be the "next big thing". At the moment the price reaches a peak, the group sells its entire position at once. The price plummets immediately and the latecomers — often retail investors — are left holding tokens that sometimes lose 90% or more of their value within minutes.

How does a pump and dump work step by step?

A pump and dump scheme almost always follows a fixed psychological and technical pattern. By understanding this process, you can recognise the trap before you put in money.

Phase 1: Buying in (the accumulation)

The initiators choose a coin with a very low trading volume and a small market capitalisation (micro-caps). With such coins, a relatively small purchase can already move the price noticeably. They quietly buy up large quantities over a period of days or weeks so as not to make the price explode too early.

Phase 2: Creating hype (the pump)

This is the active phase. Via private Telegram groups and social media, the "pump" is started. In 2026 we often see influencers being paid to promote the coin, sometimes even unknowingly via AI-generated deepfakes. Claims are made about revolutionary technology or secret collaborations with major tech companies. FOMO does the rest: unaware investors jump on the moving train.

Phase 3: The dump

As soon as the price reaches a predetermined target, the organisers give the signal to sell. They dump their enormous stock of tokens onto the market. Because there are many buyers at that moment who are still hoping for a further rise, the organisers can offload their tokens at a high price.

Phase 4: The crash

As soon as the large sell orders of the initiators empty the order book, there is no longer any support under the price. The price collapses. What remains is a 'bag' of worthless tokens for the investors who got in too late. The initiators have long since left with their profit and the Telegram groups are often immediately deleted or renamed to a new project.

How do you recognise a pump and dump?

There are clear signals that indicate a price increase is not organic.

Unexplained price increases

If a coin rises by 50% within an hour without there being any official news on reliable sources (such as the coin's official website or major crypto news sites), that is a huge red flag. Legitimate increases are usually driven by fundamental developments, not by mysterious "tips".

Aggressive promotion on social media

Be extremely careful with messages like "Grab your chance while you still can!" or "The next 100x gem!". Pump and dump groups often use bots to place thousands of similar reactions under posts to create the appearance of a huge community.

Low market capitalisation and 'shitcoins'

Projects without a clear use, an anonymous team or a website full of language errors are ideal targets for manipulators. Always check the trading volume on independent sites. If a coin was barely traded and suddenly sees millions in volume without a clear cause, there is often manipulation involved.

Well-known examples and legal status

Crypto history knows infamous cases. In 2021, SafeMoon was a much-discussed example in which celebrities were deployed for promotion, after which the value fell by more than 98%. In 2026, class-action lawsuits are still ongoing against influencers (such as Jake Paul and others) who were involved in such practices.

Is pump and dump illegal?

Yes, market manipulation is now strictly prohibited. Since the full implementation of the European MiCA regulation on 1 July 2026, the rules for market integrity in the EU are crystal clear. Regulators now have the power not only to heavily fine and legally prosecute the organisers, but also influencers who spread misleading information. The "wild west" of crypto is thereby increasingly being reined in.

How do you protect yourself as an investor?

The best protection is a healthy dose of scepticism.

• Do your own research (DYOR): Look at the technology and the use case of a coin.

• Avoid unknown tokens on unclear exchanges: Stay away from coins that are only traded on vague, unregulated platforms.

• Do not take advice from anonymous Telegram groups: Real investment opportunities are not handed out for free to thousands of strangers in a chat group.

At Coinmerce we apply a strict selection policy for the coins we offer. We only list projects that meet our standards for transparency and liquidity. This minimises the chance that you are confronted with manipulated tokens.

Frequently asked questions

Can I make money from a pump and dump?

Some traders try to "ride along", but this is extremely dangerous. Because the organisers are always one step ahead, the chance that you sell just too late is enormous. Moreover, by participating you support an illegal activity that harms the market.

Why are memecoins mainly used for these schemes?

Memecoins often have no underlying value or complex technical ecosystem, which means the price is driven purely by sentiment and hype. This makes them the perfect instrument for manipulators to build a story around.

Trading safely at Coinmerce?

Do you want to invest in cryptocurrencies without the fear of manipulative traps? At Coinmerce you choose the security of a regulated Dutch trading platform. We only offer carefully screened cryptocurrencies and provide a transparent trading environment where honesty comes first. Whether you are a beginner or an experienced trader, at Coinmerce you buy crypto easily with iDEAL or credit card within an environment that complies with the latest European regulations. Create an account today and start your crypto journey in a responsible way.