Pump and dump schemes in cryptocurrency involve artificially inflating the price of a cryptocurrency by making false or misleading claims to entice investors to buy in. The perpetrators, who already own a significant amount of the cryptocurrency, sell their holdings at the inflated price once enough investors have bought in. After they sell, the price typically drops, leaving the new investors with losses.
These schemes are illegal and are common in the crypto market due to the lack of regulation. Fraudsters often target low-market-cap or illiquid cryptocurrencies that are easier to manipulate. To protect themselves, investors should be cautious of unsolicited investment offers, conduct thorough research, and avoid cryptocurrencies that seem too good to be true or have sudden, unexplained price spikes.
