Dumping in cryptocurrency: how it works and why it is dangerous

A dump in cryptocurrency is the final phase of a coordinated attack on the value of a digital asset, which causes maximum damage to retail investors. The mechanism of this manipulation begins long before the moment of mass buying, when insiders quietly accumulate positions and then launch coordinated agitation.

How manipulation unfolds

At the first stage, a small group of participants ( developers, early adopters, coordinators ) concentrates a significant volume of tokens or NFTs in their hands. They begin active activities on social media — spreading optimistic forecasts, publishing unverified information about upcoming partnerships, alleged forthcoming listings on major platforms, and technological breakthroughs. This wave of information creates the impression of an impending success of the project.

Under the influence of such propaganda, new investors begin to actively buy the asset, believing that the train has already left the station. Each new purchase pushes the price higher, creating a self-reinforcing effect — charts skyrocket, FOMO grips even more people, and trading volumes soar.

Critical moment: when the price reaches the peak

When the price of an asset reaches a certain level — this usually happens unexpectedly quickly — the scheme organizers make a decision. They massively unload their large positions onto the market, creating a huge imbalance between supply and demand. The price starts to plummet rapidly, sometimes losing 50-80% from the peak in just a few hours or days.

Why Latecomer Investors Lose Money

Retail investors who entered a position during the hype find themselves trapped. They bought an asset at a price of 1 dollar, which seemed like the perfect entry point, but just a week later it is trading at 0.2. Attempting to sell their assets only accelerates the collapse as liquidity evaporates and demand disappears. Losses accumulate with each attempt to exit.

Why this is not just unethical, but criminal

Price manipulation on such a scale violates the legislation of most countries. This is not investing, but systematic extraction of funds from less informed market participants. Moreover, such schemes undermine trust in the entire cryptocurrency sector, creating reputational damage and deterring serious investors and regulators.

How to protect yourself

The main principle of protection is to conduct your own research before investing funds. Study the project's white paper, check the team, analyze on-chain metrics, and look at the actual distribution of tokens. Beware of assets with disproportionate concentration of tokens among a small group of individuals — this is a classic sign of a future dump. Invest in projects with transparency, real utility, and long-term vision, rather than speculation on quick price spikes.