What is a Dump?

A dump is where a substantial amount of cryptocurrency is sold off in quick succession, often by a whale. In some cases, these sell-offs drag the price of an asset downwards.

The term often goes hand in hand with a pump and dump scheme, which is associated with fraudulent activity and an attempt to artificially manipulate the price of a cryptocurrency. A perfectly legitimate dump may also relate to the swift disposal of your own cryptocurrency holdings in order to draw instant profit.

A well-known example of a dump occurred in December 2017, when Litecoin founder Charlie Lee sold his considerable holdings of LTC amid concerns that it amounted to a conflict of interest.

At first, the markets seemed unfazed by the event. However, within days, LTC nosedived and lost almost half of its worth. It took weeks to recover the lost value.

How to Predict a Dump? 

The answer to this question depends on the type of cryptocurrency in question. If it is a relatively new cryptocurrency, a coin with little to no trading volume, or a coin that has been heavily pump-and-dumped in the past, it is likely more vulnerable to a dump. 

In general, it is difficult to know for certain if a cryptocurrency will dump. However, there are some signs that may indicate a potential dump.

1. Watch for red flags such as a sudden increase in trading volume, a sudden decrease in the price of the coin, or a sudden increase in the number of coins being sold. If it looks like a large number of people are selling the coin, it could be a sign that the cryptocurrency is about to dump.

2. Watch out for whales. A whale is a large investor who may be accumulating a large amount of a particular cryptocurrency. If they suddenly start selling off their coins, it could trigger a big sell-off and a dump in the price.

3. Watch out for news or events that could trigger a dump. For example, the announcement of a new coin or a security breach could cause investors to panic and sell off their coins, leading to a dump.

Ultimately, knowledge and experience in the crypto market can help you identify potential dumps, but it is not always possible to predict them accurately.