Dumping is a term used to describe the selling of large amounts of cryptocurrencies at once, usually by miners or other early holders. It can cause dramatic drops in price and market cap as supply suddenly outstrips demand. Dumping can be done for various reasons, including profit taking or simply because the asset has become too volatile for comfort.
The effects of dumping are often exacerbated when it occurs on exchanges that do not have sufficient liquidity to absorb the large sell orders without causing significant price slippage or volatility. The sudden glut of coins being sold can also lead to panic among investors who may start selling their own holdings in order to avoid further losses.
In extreme cases, dumping can even result in exchanges halting trading altogether until prices stabilise and liquidity returns. This was seen during the Bitcoin Cash hard fork in 2017 where several major exchanges stopped trading while they assessed what impact the split would have on their markets before resuming normal operations again later that day.
While there is no sure-fire way to prevent dumping from occurring entirely, traders should be aware of its potential effects so they can make informed decisions about when and how much crypto they buy and sell. It’s also important to use reputable exchanges with high levels of liquidity so your trades will not be affected by any sudden changes caused by dumpers entering or exiting the market en masse.
