---
title: 'Crypto Pump and Dump Explained: How to Spot and Avoid It'
source: 'https://youtube.com/watch?v=CakdQBB5QnQ'
video_id: 'CakdQBB5QnQ'
date: 2026-07-18
duration_sec: 200
channel: 'CoinGecko'
---

# Crypto Pump and Dump Explained: How to Spot and Avoid It

> Source: [Crypto Pump and Dump Explained: How to Spot and Avoid It](https://youtube.com/watch?v=CakdQBB5QnQ)

## Summary

This video explains how pump-and-dump schemes operate in the cryptocurrency market, highlighting their telltale signs and providing guidance on how to avoid falling victim to them. It covers the typical phases of a pump-and-dump, recent examples, and red flags investors should watch for.

### Key Points

- **Introduction to Pump-and-Dump Schemes** [00:00] — Pump-and-dump schemes involve coordinated buying to inflate a low-value crypto's price, then selling at a peak, leaving late investors with losses.
- **How Pump-and-Dump Works** [00:25] — Large holders hype the asset on social media, causing a price surge (pump). Then they sell their holdings (dump), crashing the price.
- **Legal Gray Area** [00:55] — Unlike traditional finance, crypto pump-and-dumps operate in a legal gray area due to lack of regulation, but they are morally dubious.
- **Real Example: SONM Token** [01:44] — SONM token surged 7,000% to $13.9 on Nov 20, then crashed over 90% to $1.03 the next day, illustrating a classic pump-and-dump.
- **Red Flags to Watch** [02:13] — Sudden social media hype, celebrity shilling, low liquidity, obscure projects, and massive price spikes are key indicators.
- **Protection Tips** [02:55] — Avoid shortcuts, do your own research (DYOR), and steer clear of anything that sounds too good to be true.

### Conclusion

Pump-and-dump schemes are prevalent in crypto due to low regulation, but they can be spotted by sudden hype, massive price spikes, and obscure projects. The best defense is thorough research and skepticism of guaranteed riches.

## Transcript

The cryptocurrency world is a volatile one, but  one rollercoaster you don’t want to get caught on   is a pump-and-dump. Fortunately, pump-and-dump  schemes have telltale signs that make them  
relatively easy to spot. In this video, we’ll  show you how to identify a pump-and-dump in   cryptocurrency, so you can avoid being blindsided. Pump-and-dump schemes are when people work  
together to inflate the price of a  low-value cryptocurrency or token   by buying en masse at the same time, waiting  for other unsuspecting investors to FOMO into  
the asset, and then selling their positions  when the price rises to a certain level. Pump-and-dump schemes in the tradfi world are  illegal, but since most cryptos are unregulated,   crypto pump-and-dump schemes operate in a legal  gray area. They are morally dubious, to say the  
least, as they rely on deceiving unsuspecting  buyers and using them as exit liquidity.  This type of scam starts off with a “pump”  phase when large holders of an asset,   such as project developers or early investors,  hype up the project, often with exaggerated  
claims and promises of riches on social  media platforms like Twitter, Youtube,   or Telegram. With time, more and more people  buy the asset, causing its price to skyrocket.  What follows is called the “dump” phase, where  the original investors liquidate their holdings  
as soon as the asset reaches a certain  price and run off with huge profits. The   “dump” phase usually happens fast, with  the asset’s price falling significantly,   leaving those who got in late with no choice but  to sell as well and wind up taking heavy losses or  
having their holdings go essentially to zero. A recent pump-and-dump example can be seen on   the altcoin SONM, an old 2017 project that  offers cloud services and other hardware.
On November 20th, the SONM token surged by almost  7,000%, hitting a new record high of $13.9, after   which a vicious market sell-off ensued the next  day, collapsing the price by over 90% to $1.03. 
And while some were able to get off early, others  weren’t so lucky, which is why you should always   be on the lookout for obvious red flags. Like  if a cryptocurrency is suddenly getting a lot  
of attention on social media especially via bots,  or is being shilled endlessly by celebrities or   influencers. The assets in question often  have low liquidity or are from obscure or  
‘zombie’ projects most people have never heard  about. Sometimes these pump-and-dumps are not   orchestrated by the project itself but simply  targeted by pump-and-dump groups. Most of all,   sudden and massive price hikes of up to  hundreds or thousands of percent are almost  
always good indicators of a pump-and-dump  so this is a good enough sign to stay away. At the end of the day, the best way to protect  yourself from financial risk is to take no   shortcuts, DYOR, and don’t participate in  anything that sounds too good to be true.