Crypto Glossary

Anti-dump/Anti-Dumping Policy

In the world of blockchain, the anti-dumping policy is a set of rules that protects investors from falling victim to a pump and dump scheme, in which a large number of tokens are purchased by an investor (whale) to boost the token’s value and then dumped at a much higher price, resulting in losses to investors who purchased the asset later.

What Is an Anti-Dumping Policy?

An anti-dumping policy is a set of rules that prevents investors from falling victim to pump and dump schemes. Dumping is a term that refers to an occurrence when a big investor, also known as a whale, buys a huge number of tokens with the intention of substantially increasing the price before selling all of it for a large profit.

Take for example the SQUID token, which was once valued at only $0.01. However, as the price began to skyrocket, investors were barred from selling SQUID due to a number of policies in line, one of which was the "anti-dumping policy." In a market structured with just buyers when the price of SQUID skyrocketed the fraudsters ran off with all the invested amount. The token's price plummeted from $2,856 to $0.00079 within a few minutes.

However, not all tokens work like this. Coins such as THUNDERCAKE and DrunkDoge offer anti-dumping protection to investors. 

More than 0.1 percent of the total supply of THUNDERCAKE tokens cannot be sold. Furthermore, the buy orders of the THUNDERCAKE tokens cannot exceed 0.5 percent of the entire supply. Both of these rules are in place to keep whales out of their ecosystem and avoid dumping.

Likewise, DrunkDoge regulates price volatility by prohibiting whales from purchasing or selling significant sums of tokens in a single transaction. It has an anti-dumping mechanism in place which enforces a 1/2/6 hour cooling-off period and increased tax after each sale to avoid excessive currency dumping.

To protect investors, there are more policies in place apart from anti-dumping, such as buybacks. Companies use a buyback policy for many reasons—to lower the number of tokens in circulation with time. The aim is to significantly raise token values, generate speculation, and build hype.

Several projects have conducted buybacks including Binance, Nexo, and others. Nexo's buyback, for example, occurred because the core development team estimated their asset's depreciation. As a result, they decided to restrict the number of project tokens in circulation which helped in improving the market price.

With the frenzy that surrounds a token price surge, you may be tempted to make an investment or try your luck like everyone else, but there are some ground rules that you must observe.

  • Keep an eye out for social media groups that provide free signals indicating that a pump is about to commence. This is one of the signs to identify a P&D scheme, wherein some of the group members can be directing the pump.
  • Seek financial guidance from an expert or conduct your own research to make smarter investing choices. Be careful of any influencer you follow who seldom discusses cryptocurrencies and then starts advocating a token randomly.
  • Invest an amount that you can afford to lose. It's possible that an investor may profit from a pump-and-dump if the timing is good, but it's preferable to anticipate any mishap that finally leads to losing your tokens.

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