A dump (Dump, from the English "to dump," "to pour out") is the deliberate sale of a crypto asset in large volumes with the goal of artificially crashing its price in the short term. Unlike ordinary profit-taking, a dump is often organized in nature and is used as a tool for influencing the market.
The term is often mentioned together with the "pump and dump" scheme. First the organizers artificially drive up the price of a low-liquidity asset, attracting attention and an inflow of buyers (the pump), and then sell off their accumulated positions all at once at the peak (the dump). As a result, the price falls sharply, and latecomers are left with depreciated assets.
Why a dump is dangerous for an investor
- a sharp and rapid fall in the asset's value;
- a high risk for those who bought during the hype;
- the difficulty of distinguishing manipulation from a natural correction.
Understanding the mechanics of a dump helps one to treat assets with a suspiciously sharp rise and low liquidity more cautiously. Manipulative practices of this kind are considered improper in many jurisdictions, so a critical approach to hype is an important part of risk management.
