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Pump and Dump Schemes - How to Spot and Avoid Investment Scams

Learn everything about pump and dump schemes and how to identify it, in this descriptive guide.
Token Metrics Team
7 Minutes
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As the world of finance continues to evolve, new and innovative investment opportunities have emerged. However, alongside these opportunities come potential risks and scams.

One such scam that has become increasingly prevalent is the "pump and dump" scheme. In this article, we'll discuss what a pump and dump scheme is, how to spot it, and how to avoid falling victim to such investment scams.

What is Pump and Dump?

Pump and dump is a type of investment fraud used in the financial market where one or more people intentionally raise the price of a stock, crypto or other financial assets by disseminating false or deceptive information to lure investors. 

Once the price has increased to the desired level, these manipulators sell their shares at a profit, leading to a decrease in price, and leaving innocent investors with securities that are either worthless or overpriced.

How Does the Pump and Dump Scheme Work?

The mechanics of a pump and dump scheme works by manipulating microcap assets, such as penny stocks or cheap cryptos, which are companies with a small market capitalization. These assets are usually traded at a very low price, and do not follow strict requirements for public listing.

Therefore, scammers can easily manipulate information about these assets. The lack of publicly available information provides fraudsters with favorable conditions since potential investors lack the necessary sources to verify all the information about a company and management.

Moreover, microcap assets are highly illiquid and have very low trading volume. As a result, even small transactions can significantly boost the asset price.

The fraudster typically starts by buying a large number of shares in that type of micro cap asset, then spreading false information about the company through various channels, such as social media, chat rooms, and email newsletters.

Once the price of the asset has been artificially inflated, the fraudsters will begin selling their holdings, realizing significant profits. As the scheme is uncovered, the price of the asset typically plummets, leaving unsuspecting investors with significant losses.

Types of Pump and Dump Schemes

There are several types of pump and dump schemes in financial world, including:

Pre-arranged pump and dump: A group of fraudsters will agree to buy a particular asset simultaneously, creating an artificial demand and price surge. Once the price has reached a certain level, the fraudsters will sell their holdings, causing the price to crash.

Social media pump and dump: Fraudsters will use social media platforms to spread false information and create hype around a particular cryptocurrency, stocks or any other asset, encouraging investors to buy. Once the price has been inflated, the fraudsters will sell their holdings.

Exchange-based pump and dump: Fraudsters will use exchanges with low liquidity to create artificial demand for a particular asset, causing the price to surge. Once the fraudsters have sold their holdings, the price typically crashes.

Role of Social Media in Pump and Dump Schemes

Social media plays a significant role in pump and dump schemes as it allows individuals to disseminate false or misleading information about a stock or cryptocurrency quickly and easily to a large audience. 

Scammers may create fake social media profiles or use existing ones to promote the cryptocurrency or digital asset and spread positive news about it, encouraging others to invest. They may also use social media to organize groups of investors to buy and sell the asset at specific times to manipulate its price. 

Social media platforms such as Twitter and Telegram are popular channels for these activities. Investors must be cautious and verify the accuracy of information before making investment decisions based on social media posts or messages.

Pump and Dump Examples

Here are some real-life examples of crypto pump and dump schemes:

Verge - In April 2018, the cryptocurrency Verge experienced a sudden price increase of over 300% in just a few hours. The price increase was caused by a group of individuals who coordinated a pump and dump scheme on social media platforms. The group created false hype around the cryptocurrency, which caused a massive influx of investors who were looking to get rich quickly. 

Soon after the scheme was executed, the value of the cryptocurrency dropped sharply, resulting in substantial losses for investors who failed to dispose of their holdings promptly.

Dogecoin - Dogecoin is a cryptocurrency that was created as a joke in 2013 but gained a significant following due to its popularity on social media. In 2021, a group of individuals on Reddit coordinated a pump and dump scheme on Dogecoin, causing its value to increase significantly in a very short span of time.

The group created a social media campaign that encouraged investors to buy and hold Dogecoin, which caused its value to skyrocket. However, as with all pump and dump schemes, the value of the cryptocurrency eventually plummeted, causing significant losses for investors who were not able to sell their holdings in time.

How to Spot Pump and Dump?

There are several warning signs that investors can look for to spot a pump and dump scheme -

High-pressure sales tactics - Fraudsters often use high-pressure sales tactics to convince investors to buy into a stock or crypto quickly before the price goes up. They may use language such as "this is a once-in-a-lifetime opportunity" or "you don't want to miss out on this."

Unsolicited investment advice - Be wary of unsolicited investment advice from people you don't know, especially if it comes in the form of an email or social media message. Fraudsters may pose as legitimate investment advisors or insiders and offer tips on assets that are "about to take off."

Huge price swings - If you see a stock that is experiencing huge price swings with no apparent reason, this could be a sign of a pump and dump scheme. 

Lack of information - If you can't find any information about a company or its products, this could be a red flag. Pump and dump fraudsters often create shell companies or use obscure assets to make it difficult for investors to do their due diligence.

Misleading information - Be skeptical of any information that seems too good to be true. Pump and dump fraudsters often make false or misleading statements about a company's financial health, products, or industry.

How to Avoid Pump and Dump Schemes?

Here are some tips for avoiding pump and dump investment scams:

Do your research - Before investing in any stock, crypto or other asset, do your research. Read the company's annual report, financial statements, and news articles about the company.

Be skeptical - If an investment opportunity seems too good to be true, it probably is. Be skeptical of high-pressure sales tactics, unsolicited investment advice, and promises of guaranteed returns.

Avoid small-cap cryptocurrencies or assets - Investors should be wary of investing in small-cap cryptocurrencies or assets, particularly those with low liquidity.

Use stop-loss orders - Investors can use stop-loss orders to automatically sell their holdings if the price of the cryptocurrency or assets falls below a certain level.

Diversify your portfolio - Don't put all your eggs in one basket. Diversify your portfolio by investing in a variety of stocks, bonds, cryptos and other assets. This will help minimize your risk and protect you from losses.

Use a reputable trading platform - When buying or selling assets, use a reputable trading platform only. Check the platform's credentials and make sure they are trusted, widely used and legally registered.

Is Pump and Dump illegal?

Yes, the pump and dump scheme is illegal as it involves the intentional manipulation of the price of assets through false or misleading information. This scheme is a violation of securities laws in many jurisdictions and can result in serious legal consequences for those who participate in it. 

In addition to legal repercussions, individuals who fall victim to the pump and dump scheme can suffer significant financial losses. It is essential for investors to be aware of the risks associated with this fraudulent activity and to exercise caution when investing in cryptocurrencies.

The Bottom Line

In conclusion, the pump and dump scheme is a fraudulent trading strategy that manipulates the price of financial assets by artificially inflating its value resulting in illegal profits for a select group of individuals. 

It is important for investors to be cautious, while making investment related decisions in the stocks, cryptos and digital assets. Since these assets can be volatile and unpredictable.

Disclaimer

The information provided on this website does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the website's content as such.

Token Metrics does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.

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→ Join the waitlist to be first to trade TM Global 100.

Why Indices Matter in October 2025

Search intent right now: investors want credible, rules-based crypto exposure that can participate in upside while reducing drawdown pain. A crypto index is a basket of assets selected and maintained by rules—so you avoid one-off bets and constant manual rebalancing.

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Definition

A crypto index is a rules-based basket of digital assets that’s constructed, weighted, and rebalanced on a set schedule.

How the TM Global 100 Index Works (Plain English)

  • Regime switching: Bullish: Hold the top-100 crypto assets by market cap.
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  • Weekly rebalancing: Reflects updated rankings and weights across the market-cap universe.
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  1. Open the Indices Hub: Head to the Token Metrics Indices hub.
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  3. Join the Waitlist: Add your email to be notified the moment trading opens.
  4. (Optional) Connect Wallet: Pre-connect your wallet for a faster launch-day checkout.

Launch-Day Flow (~90 seconds): Tap Buy Index, review fees/slippage, confirm, and see your position in My Indices. Track Rebalances: After each weekly rebalance or regime change, check the Transactions Log for updates.

→ Join the waitlist to be first to trade TM Global 100.

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  • Hands-Off Allocator: Want broad exposure without micromanaging? Yes—rules-based + weekly rebalances.
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FAQs

1) What is a TM Global 100 index?

It’s a rules-based crypto index that holds the top 100 assets by market cap in bullish regimes and moves to stablecoins in bearish regimes. It rebalances weekly and shows transparent holdings and transactions.

2) How often does the index rebalance?

Weekly, with additional full-portfolio switches when the market regime changes.

3) What triggers the move to stablecoins?

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At launch, funding and settlement options surface based on the embedded wallet and supported chains. USDC payouts are supported for selling; additional entry options may be introduced later.

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  • Auditability: Holdings, treemap, and transactions log are always visible.
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  • Regional availability: Product surfaces may vary by region as we expand.

Crypto is volatile and can lose value. Past performance is not indicative of future results. This article is for research/education, not financial advice.

Conclusion

If you want a disciplined, rules-based core that adapts to market regimes, Token Metrics Global 100 is built for you. Weekly rebalances, transparent holdings, and one-click buy remove operational friction so you can focus on your strategy.

→ Click here to get early access to Token Metrics indices.

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To gain early exposure, follow these steps:

  1. Open the Token Metrics Indices hub.
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  6. Funds appear in your index portfolio, enabling easy tracking and management.

Is This Index Suitable for You?

Consider your investment style:

  • Hands-Off Allocator: Ideal if you prefer broad market exposure with minimal management.
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  • DIY Enthusiast: Replace complex basket-building with a rules-based index.
  • Self-Custody User: Benefit from integrated self-custodial wallets with clear transaction records.

FAQs

What is a top crypto index?

It is a rules-based basket that tracks a defined universe of digital assets—such as the top 100 by market cap—using transparent methodology and scheduled rebalancing.

How often does the index rebalance?

The index rebalances weekly, with regime switches occurring when market signals change, ensuring adaptability during different market cycles.

What prompts the move to stablecoins?

A proprietary market-regime signal triggers the transition, exiting token positions to stablecoins during bearish periods and re-entering when signals turn bullish.

Can I fund with USDC or fiat?

At launch, the embedded wallet will support supported funding options based on your chain or wallet. USDC payout is available upon sale; further options may follow.

Is the wallet custodial?

No. It’s an embedded, self-custodial smart wallet—giving you full control over your private keys and funds.

How are fees shown?

Estimated gas, platform fee, slippage, and minimum expected value are displayed before you confirm the transaction, providing full transparency.

How do I join the waitlist?

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If you’ve tried to “own the market” in crypto, you’ve felt the pain: chasing listings, juggling wallets, and missing rebalances while prices move. A top 100 crypto index aims to fix that—giving you broad exposure when the market is bullish and standing down when it’s not. Token Metrics Global 100 is our rules-based version of that idea: it holds the top-100 by market cap in bull regimes, moves to stablecoins in bear regimes, and rebalances weekly. You can see every rule, every holding, and every rebalance—then buy the index in ~90 seconds with an embedded on-chain flow.‍ → Join the waitlist to be first to trade TM Global 100.

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How the TM Global 100 Index Works (Plain English)

Regime switching:

  • Bullish: The index holds the top-100 assets by market cap.
  • Bearish: The index exits positions and moves fully to stablecoins until a bullish re-entry signal.

Weekly rebalancing:

  • Every week, the composition and weights update to reflect current market-cap rankings. No manual list maintenance. No “oops, I missed the new entrant.”

Transparency:

  • Strategy modal explains selection criteria and regime logic.
  • Gauge → Treemap → Transactions Log shows the signal, the real-time holdings view, and every rebalance/regime switch.

You’ll always see what you own, how it changed, and why.

What you’ll see on launch

  • Price tile, 100 tokens, “rebalances weekly,” and one-click Buy.
  • Gauge to visualize the market signal.
  • Holdings Treemap and Table to inspect exposure.
  • Transactions Log to review every rebalance.
  • See the strategy and rules.

Benefits at a Glance (Why This Beats DIY)

  • Time saved: Skip hours of asset chasing and manual spreadsheets; rebalances happen automatically.
  • Lower execution drag: One index buy can reduce slippage vs. piecing together 20–50 small orders across chains.
  • Never miss a rebalance: Weekly updates and on/off risk switches run by rules, not vibes.
  • Rules-based switching: A clear trigger defines when to sit in stablecoins—no second-guessing.
  • Full visibility: The gauge, treemap, table, and log make the process auditable at a glance.
  • Operational simplicity: An embedded wallet, 90-second buy flow, fee and slippage estimates upfront.

Step-by-Step: How to Get Early Access (Waitlist)

  1. Open the Indices hub and tap TM Global 100.
  2. Join the waitlist with your email—this flags you for day-one access.
  3. (Optional) Connect your wallet so you’re ready for the embedded checkout.
  4. Launch day: You’ll get an email and in-app prompt when trading opens.
  5. Buy in ~90 seconds: Connect, review fees/slippage/estimated value, confirm.
  6. Track positions: See your holdings, rebalances, and P&L in My Indices.
  7. Repeat or add funds: Rebalancing is handled weekly; you can add or sell anytime.

→ Join the waitlist to be first to trade TM Global 100.

Decision Guide: Is This Right for You?

  • Hands-Off Allocator: Want broad market exposure without managing coin lists? Consider it.
  • Active Trader: Want a disciplined core you don’t have to watch while you chase setups? Consider it.
  • TM Member (Research-Heavy): Prefer to keep your picks, but want a market base layer? Consider it.
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FAQs

What is a top 100 crypto index?

A rules-based basket tracking the largest 100 assets by market cap, typically with scheduled rebalancing. Token Metrics Global 100 adds regime switching to stablecoins during bear markets.

How often does the index rebalance?

Weekly. In addition, if the market signal flips, the entire portfolio may switch between tokens ↔ stablecoins outside the weekly cycle.

What triggers the move to stablecoins?

A proprietary market-regime signal. When it’s bearish, the index exits tokens to stablecoins and waits for a bullish re-entry signal.

Can I fund with USDC or fiat?

On launch, funding options surface based on your connected wallet and supported chains. USDC payouts are supported when selling.

Is the wallet custodial?

The embedded wallet is self-custodial—you control your funds.

How are fees shown?

Before you confirm a buy, you’ll see estimated gas, platform fee, max slippage, and minimum expected value—all up front.

How do I join the waitlist?

Go to the TM Global 100 page or the Indices hub and click Join Waitlist. You’ll get notified at launch with simple steps to buy.

Security, Risk & Transparency

  • Self-custody: Embedded, self-custodial smart wallet; you control keys.
  • 2FA & device checks: Standard authentication best practices.
  • Fee/slippage transparency: All estimates are shown pre-trade; you confirm with eyes open.
  • On-chain visibility: Holdings, rebalances, and regime switches appear in the Transactions Log.
  • Rule constraints: Signals can be wrong; spreads and volatility can impact outcomes.
  • Regional considerations: Availability and tax treatment vary by jurisdiction.

Crypto is volatile and can lose value. Past performance is not indicative of future results. This article is for research/education, not financial advice.

A top 100 crypto index is the simplest path to broad market exposure—if it’s built with discipline. Token Metrics Global 100 combines transparent rules, weekly rebalancing, and a regime switch to stablecoins, so you can focus on your strategy while the core maintains itself. Now’s the time to claim early access.‍ → Join the waitlist to be first to trade TM Global 100.

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