Not really: just because the market cap of an altcoin is in the billions doesn't mean there's more than a tiny fraction of that amount actually invested (as in, bought with fiat) into it.
Yeah but the trading volume shows that there is substantial activity on a boatload of altcoins. Of course it may be artificially inflated but I do believe that a lot of people did invest back in the coincraze last December - and for what its worth now that prices are more down-to-earth it may be possible that the more adventurous want to buy in as long as the prices are low...
Yeah, I can make a coin with $10T supply and sell one for $1 and imply a $10T market cap.
…Which makes trading volume a very important statistic to monitor.
He could proceed to have a bunch of bots throw coins around randomly, also, so trading volume gives you nil reliable info, either.
This sort of behavior only works on exchanges with zero or extremely low trading fees.
It also works when you own the exchange. There's pretty good reason to believe wash trading is happening at several exchanges...possibly performed by the exchange themselves. I'm more willing to believe Bitfinex is doing the BTC wash trading that's happening on their exchange, rather than some whale doing it (the very close connection between Tether and Bitfinex, sharing several founders and C-levels, makes this seem even more likely).
The trading fees would merely have to be lower than the appreciation in the value of your own holdings as a result of the apparent legitimacy.
At 0.05% fee (public rate for Binance, is probably lower for people in the know), it is a four-figure USD investment to get your coin in the top 100 volume chart for a day. Then when real people start buying in, you can sell a tiny fraction of your holdings to finance more fake volume.
Volume is just as gamable with a bit more effort. One person can create $1B volume by moving $1M between two coins 1000 times. And consider that $1M could be inflated by a major creator/miner of the coin as discussed above. Get yourself up the volume and market cap charts with this inflation and people outside the scam will buy in. There you go, the basic anatomy of a pump and dump.