Cryptocurrency markets have seen a surge in price increases for various tokens, leaving many wondering what drives these rapid rises. A closer look at the market reveals that pump-and-dump schemes are behind these spikes, where insiders manipulate supply and demand to create artificial shortages and drive up prices.
The process typically begins with insiders accumulating large amounts of tokens at low prices or holding onto them in anticipation of a price increase. They then withdraw tokens from exchanges, creating an artificial shortage and triggering FOMO (fear of missing out) among investors. As the price rises, futures and leverage are added to push it even higher.
At the peak, insiders dump their large volumes of tokens, causing the price to collapse by 70-95%. This cycle repeats itself with new tokens, often resulting in sharp losses for unsuspecting investors.