A pump and dump involves manipulating the price of a currency. A pump and dump often takes place for coins with a low market capitalization. It then takes fewer large transactions to cause the price to fall or rise rapidly.
Often stocks and crypto currencies are bought based on price appreciation. Scammers take advantage of this by influencing the price. On a stock exchange, this kind of manipulation is illegal but with crypto it is difficult for authorities to do anything about it because of the lack of laws and regulations.
In a pump and dump, a group often buys an unknown cryptocurrency at a low price, say 1,000,000 coins for 1 cent each. Then, in forums and chat groups, other people are encouraged to buy the same coin. As demand rises, so does the price of the coin. This in turn attracts a new group of people who see the sudden rise and hope to make a profit as well. Meanwhile, the price of the coin is already at 80 cents. Thus more and more people buy hoping to make a profit, this is the pump. The moment the scammers are satisfied with their loot they sell everything. This is the dump. Those who bought the coin first often have the most profit. People who bought the coin last often lose everything and are left with a worthless coin.
