Altcoin pumps are characterized by rapid price increases over a short timeframe. These movements are often fuelled by market sentiment. Positive news, social media hype, or community enthusiasm can trigger a pump. The spread of misinformation, particularly on social media, plays a role; Forums are flooded with positive news and hype, regardless of the altcoin’s fundamentals. This attracts unsuspecting investors.
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Price Manipulation
Whales, who are individuals or entities holding large amounts of cryptocurrency, manipulate the price through strategic buying and selling. Once the price reaches its peak, the orchestrators of the pump quickly sell off their holdings, leading to a sharp decline in price. This is known as a “dump.”
Arbitrage Bots
Arbitrage is a practice that consists of taking advantage of the price difference between two markets by buying in one market and selling in another market at a higher price. Moments after a pump and dump starts, the price of the coin under attack quickly increases. This price spike triggers the arbitrage bots that start to buy and sell the currency on a different market or other trading pairs.
Older Coins
Older coins with deeper liquidity and investor familiarity attract capital first. One might need to wait for a true altseason to see newer coins pump.
Panic sells occur when the price goes down for fear the price keeps falling and panic when altcoin rises.
This can be used on higher timeframes for greatest accuracy. If altcoin is newish, try lower timeframes.
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