A recent study by blockchain analytics firm Chainalysis found that 24% of tokens released in 2022 had the characteristics of pump-and-dump schemes.
Most of the tokens plummeted by 90% in the first week of their launch after their creators dumped their holdings. This, according to Chainalysis, is a typical feature of a pump and dump scheme.
More than 9,000 new tokens in 2022 were fraudulent
Crypto pump and dump schemes involve the creators of a digital asset promoting and promoting the token, often with misleading claims, which would cause the price to rise rapidly as new investors join the project. The creators would then sell their holdings and accumulate profits as the token price crashes, leaving investors stuck with low-value assets.
According to the reportmore than 1.1 million new tokens have been launched on the Ethereum and BNB Chain in 2022. After evaluating the projects against criteria of 10 minimum trades and four consecutive trading days in the week after launch, Chainalysis found that only 40,521 tokens gained ground.
Among the 40,521 tokens that gained ground, the price of 9902 (24%) declined significantly in the first week after launch, showing telltale signs of possible pump and pull activity. A price drop of 90% or more is a clear sign that the token creators dumped their assets quickly.
chainanalysis He pointed to the possibility of market forces affecting the price movement of the tokens, despite so much effort put in by the teams.
While the promotional strategy for such tokens remains uncertain, chainanalysis used an evaluation service to rate new tokens on a scale of zero to 100 based on their trustworthiness. All 25 that were tested scored zero, indicating that they were most likely pump-and-discharge schemes.
Victims invested $4.6 billion in pump and dump schemes
Additionally, the blockchain analytics firm revealed that victims of the pump-and-dump schemes spent and pocketed approximately $4.6 billion worth of crypto. By comparison, creators racked up $30 million in profit after selling their properties.
A chain pattern also suggested that the wallets involved in the schemes share common ownership.
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