Pump and dump
In short A pump and dump is a scheme that inflates a token's price with coordinated buying and hype, then sells into that demand, leaving late buyers with the losses.
A pump and dump is a manipulation scheme where a person or group accumulates a token cheaply, pushes the price up with coordinated buying and promotion, then sells into the demand they created. The price collapses, and anyone who bought late is left holding a bag worth a fraction of what they paid. It is illegal in regulated markets like stocks, but crypto trades across anonymous wallets and many venues, so enforcement is thin.
Mechanically, it runs in stages. Organizers buy a low-liquidity token, usually a small cap with a thin order book or a small liquidity pool, so that modest money moves the price a lot. Then they promote it through Telegram groups, X posts, paid influencers, or fake volume from wash trading, which creates the look of momentum. Once outside buyers pile in, the organizers sell, sometimes in a few big orders and sometimes quietly, bit by bit.
The damage lands on whoever buys near the top. In small tokens the drop can be 80 to 95 percent within minutes, because there is almost no real buying interest underneath the price. Exiting is also harder than entering: slippage grows as a pool drains, and bots can front-run your sell. Not every pump is run by an outside group, either. Insiders and early holders sometimes do the same thing on their own token.
Warning signs include a sharp rise with no product or news behind it, a flood of near-identical posts, callers announcing a countdown or a specific time to buy, and hype that talks only about price. Check the holder list on a block explorer: if a handful of wallets, possibly funded by the same source, hold a large share of supply, they can dump on you. Compare liquidity to market cap, see whether liquidity is locked, and look at whether the deployer wallet funded the earliest buyers.
Plenty of tokens run up on real attention and then fall, and that is not automatically a pump and dump. The difference is coordination and intent, which you often cannot prove from the outside. A practical rule is that if you only know about a token because someone is urging you to buy right now, you may be the exit liquidity. Only put in an amount you could lose entirely.