This year in the crypto world, there is one unavoidable concept: “pump-and-dump tokens.” Over the past week, the price of $RAVE has been continuously rising, peaking at about 40 times its value from a week ago. Now, $RAVE’s market cap has reached the 41st position in the market.
From the recent $SIREN and $STO to earlier ones like $PIPPIN, $RIVER, $BEAT, and $MYX. No matter how sluggish the market is, and even though “pump-and-dump tokens” represent an information asymmetry game between retail players and market makers, there are always players chasing volatility, diligently analyzing and trying to capture the logic behind these “pump-and-dump tokens” to find a winning strategy.
In the Chinese-speaking community, a complete “science of pump-and-dump tokens” has gradually emerged.
What Are “Pump-and-Dump Tokens”?
If the definition of “pump-and-dump tokens” were simply “fast and sharp price increases,” then the “science of pump-and-dump tokens” wouldn’t exist. The essence of retail players engaging with “pump-and-dump tokens” is a direct game with market makers, trying to snatch a piece of profit from their manipulation.
Based on this essence, KOL Crypto Skanda (@thecryptoskanda) provided a detailed definition of “pump-and-dump tokens,” establishing the foundation of the “science of pump-and-dump tokens”:
– Spot control rate is basically above 96%
– Has Binance futures contracts; whether it has a spot listing is less important
– Typically uses over-the-counter financing to create massive liquidity and counterparty positions through violent pump-and-dump cycles in a short time
– Market makers profit by triggering long/short liquidations and collecting counterparty fees, eventually completing spot sell-offs to finish the entire harvesting process
How to Identify “Pump-and-Dump Tokens”?
On this issue, different players have provided excellent reference ideas from various angles.
Abnormalities in open interest can manifest in multiple ways, first through “data manipulation.” On April 11, @Arya_web3 discovered that the 24-hour open interest data for $RAVE on that day was $60 million, $60 million, $60 million, $26 million, and $26 million on Binance, Bitget, BingX, OKX, and Bybit, respectively. Based on this data and the overall open interest data across exchanges, she speculated that the data from BingX and Bitget appeared abnormal in horizontal comparison, suggesting possible manipulation of open interest data.
Additionally, $RAVE’s 24-hour futures trading volume that day was $6.9 billion, with futures holdings at $300 million. Market makers had raised the price 10-fold from the bottom, yet there were no large liquidation orders, further increasing the likelihood of futures data manipulation. She also mentioned that observing which exchanges experience concentrated liquidation orders can serve as a basis for judging whether open interest data is manipulated on certain exchanges.
@thecryptoskanda summarized and supplemented the above observations:
– The lower the median proportion of Binance’s open interest, the higher the degree of market maker manipulation
– A high futures trading volume/open interest ratio indicates a higher likelihood of open interest data manipulation
– This means that all strategies solely monitoring futures trading volume or open interest are flawed, as market makers may intentionally stop manipulating open interest data to lure retail players in
You might say this analyzes “pump-and-dump tokens” based on data that has already occurred or is occurring. Is there a way to analyze them before they start?
No. In @thecryptoskanda’s words:
“Pump-and-dump tokens don’t become pump-and-dump tokens because they meet certain indicators. Rather, because they are inherently pump-and-dump tokens, they develop those indicator characteristics. Pump-and-dump tokens never make sense with the broader market; they only relate to one thing—whether there is a market maker?”
How to Judge When a “Pump-and-Dump Token” Is About to Crash
The first angle, proposed by @wuk_Bitcoin, is the “divergence between price and open interest,” which can be used to judge if a “pump-and-dump token” is nearing a crash. @wuk_Bitcoin stated that rising prices coupled with continuously declining open interest is a sign before a crash.
“Market makers close all long positions at high levels, then prop up the price to continue finding counterparty positions, allowing retail players or electronic traders to enter long positions for arbitrage. Once counterparty positions are established, they quietly add short positions. After short positions are set up, they remove the price support orders,顺势砸盘,一边砸一边继续叠加空单, until the final crash.”
He also emphasized the need to look at 1-hour level data, as smaller timeframes cannot confirm market maker intentions.
This angle also has certain flaws, as mentioned earlier with “data manipulation.” However, by reducing the observation timeframe for open interest, another angle emerges: “massive liquidations and sharp drops in open interest leading to market maker exit.”
This angle was proposed by @CryptoRounder and elaborated by @thecryptoskanda:
“When a price at a certain level triggers massive liquidations causing a sharp drop in open interest, short counterparty positions disappear, and market makers lose the willingness to maintain high prices, leading to a decline—this is a more definite top signal.”
Although the above two angles emphasize “how to escape before a pump-and-dump token crashes,” this is already the most rational decision retail players can make in the highly asymmetric information game of “pump-and-dump tokens”—finding the point where market makers decide to abandon the token and designing trades around it. After all, before a “pump-and-dump token” crashes, market makers can repeatedly trigger long and short liquidations. Once market makers truly exit and stop supporting the price, the downtrend of the “pump-and-dump token” becomes irreversible.
Conclusion
Although various experts strive to find stable profit paths in “pump-and-dump tokens” and have provided many sharp insights, it’s crucial to always remember that “pump-and-dump tokens” earn their name because their control rates are as high as 95% or more.
While we can detect traces of market maker manipulation from many dimensions and even achieve victory in the “pump-and-dump token” game through data analysis, each “pump-and-dump token” situation is difficult to generalize through analysis and replicate in every game.
The market makers behind “pump-and-dump tokens” are the ones holding the script. They can manipulate data to confuse retail players and use various methods to harvest retail players for profit.
According to @Arya_web3’s speculation, the cost for market makers to manipulate open interest data is not high. Based on a 24-hour futures trading volume of $7 billion and a fee rate of 0.005%, the 24-hour cost is only $350,000.
If the core replicable point in “pump-and-dump token” trading lies in “predicting the market maker’s moves,” the difficulty is akin to betting against someone holding the script on what the next scene will be. Such difficulty is like having divine insight, which can be described as “superhuman level.”
