A rapid drop in a coin’s price due to a sudden unprecedented sell-off of the coin. Dumping occurs when holders of a token/coin sell-off large quantities of the token in a very short amount of time.
The Long Explanation
The crypto market is extremely sensitive to both external and internal actions, making it an incredibly volatile market. As a result, certain factors could either see investors rapidly buy-up a particular token (known as pump), or quickly sell-off their positions in a token (known as dump).
Because token dumps often resonate across the market, they negatively affect market prices. When an asset is sold off in large quantities by large investors, the price is dragged downwards.
There are many potential reasons for the dump of an asset. A fairly common reason is the emergence of a sudden FUD (fear, uncertainty, and doubt). This could be due to negative news such as suspicions of scam, exchange hacks, and project uncertainty, or even false rumors.
Dumps also sometimes occur in response to the exit of a whale (investors with unusually large tokens) from a project. Such an exit, when spotted by other investors, could lead to a panic within the market that leads others to sell and drive down the prices.
But dumps can also be artificially induced. In this case, it is typically preceded by an equally artificially-induced pump to form what is known as a “pump and dump” scheme.
Pump and dump schemes are hugely damaging to the crypto market as they attempt to manipulate the price of a cryptocurrency, and earn the orchestrators huge amounts of profit. A pump and dump scheme is typically orchestrated in tandem by a group of investors.
