Definition ∞ A pump and dump is a fraudulent scheme where misleading information artificially inflates an asset’s price, followed by a rapid sell-off. Perpetrators acquire a low-priced asset, then disseminate false or exaggerated positive news to create demand and drive up its value. Once the price reaches a desired peak, the organizers quickly sell their holdings, causing the price to collapse and leaving other investors with significant losses. This manipulative practice is illegal in traditional financial markets and is also prevalent in less regulated digital asset environments.
Context ∞ The digital asset market remains susceptible to pump and dump schemes due to its relative youth and sometimes limited regulatory oversight, posing substantial risks to retail investors. Discussions frequently highlight the need for increased market surveillance and investor education to identify and avoid such deceptive practices. Future regulatory actions and technological solutions are expected to improve detection and prevention of these manipulative activities.
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