Often, the price of digital currencies with small capitalization rises by tens and hundreds of percent, after which a crash follows. Experts said whether it is possible to find such a currency before the jump in its course, and what are the risks of this strategy
At the end of December, the value of the Santa Floki token increased by 4000% after Tesla and SpaceX CEO Elon Musk posted a photo of a puppy named Floki on Twitter. It is not surprising that in November, after the billionaire’s tweet, three meme symbols grew: the price of Viking Swap increased by 800%, VikingChain 329%, and Space Vikings by 150%.
This dynamic is not only shown by the currencies themselves. In December, the value of the Voxies token instantly rose by 3,350% after existing On the cryptocurrency exchange Binance. The project held a token sale on the Binance Launchpad, with 120,500 users participating. As for the price of the bread token, it went up by 500% overnight. This happened after Breadwallet, the developer of the wallet of the same name, announced that it had acquired the cryptocurrency Coinbase.
Why does the “pumps” Did they happen?
Most of the time, it’s a file “pumps”Viktor Bershkov, principal analyst at 8848 Invest, explained that a sharp rise in price during one or two trading sessions in the cryptocurrency market occurs for two reasons.
The first reason, very common, is the fundamental basis for vigorous growth. During 2015-2017, it was sufficient to mention the inclusion of a cryptocurrency or token on a new trading platform for traders to start buying the asset, which led to “Pump”the expert said.
in this time “pumps” It happens a lot due to influencer statements, as in the case of Elon Musk’s tweets about cryptocurrency memes. However, there are also more obvious situations: often a file “Pump” Follows news related to the milestone achievement of a major crypto project or partnership with major players.
“Fundamental data and news provide the basis for strong growth. I recommend being up to date on the development of projects, and following promising partnerships and developer announcements, so you have the opportunity to participate in “Pump” up front, not the time for price growth”Bershkov advised.
The second reason for “pumps” It is the promotion of assets by project or community teams. In the second case, it is no secret to anyone that closed messages and social networks gather people who are interested in a sharp rise in prices. The analyst explained that these could boost the prices of illiquid assets through large purchases, especially on smaller exchanges.
It is necessary to understand that the winners of the so-called “pumping groups” They are mainly regulators. Nikita Zuborev, chief analyst at Bestchange.ru, added that they had time to buy and place sell orders shortly before the announcement of the purchase item to the rest of the group.
The most popular sites for really big groups are Reddit and Discord, which are exclusively in English. The most striking example is WallStreetBets, where a portion of their community is interested in cryptocurrency. Zuborev said that local Russian groups on Telegram are rarely able to organize large-scale movements.
about the “Pump” Bershkov believes this practice has become less common in recent years, but it still happens, and often for good reasons. He noted that by raising the price of the token, you can not only increase the hype around it, but also sell the remaining cryptocurrencies at a price better than market prices. Accordingly, the goal in this case is to close positions with the help of participants who have succumbed to a sharp rise in prices, as explained by the expert. In some cases, a file “Pump” followed by” Get out of the scam ».
Tokens that have appeared recently on the large central exchanges are often exposed to it “pumps”Zuborev says. According to the expert, even without taking into account the meteoric growth at a time existingthe possibilities for manipulation are more numerous in currency pairs ” youths “, of which the supply is still relatively limited.
Is it possible to make money on “pumps” ?
Even when you understand the pattern “pump and dump”It is not easy to make money from these price jumps. Most of the time the average trader actually discovers it “Pump” And it is very likely that you will lose money if you do not have time to fix the profit very quickly. Zubarev sometimes warned that minutes or even seconds would pass before a change of direction would take place. He mentioned a more interesting strategy: open a short position at an assumed price peak.
But we do not recommend “short pants” Very large projects like Ethereum or Binance Coin. Although their chart shows clear manipulation, cases of price consolidation at the local maximum with the uptrend continuing are not uncommon. In general, you have to be very careful in dealing with short positions about market growth”warned the principal analyst of Bestchange.ru.
Try to login to “Pump” Nikita Suchnikov, Director of Cryptocurrency Exchange Service, added that alone is a very risky, almost impossible strategy. He explained that when ” pump It becomes visible, it is too late to enter.
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