According to Chainalysis, around 10,000 tokens issued in BNB and Ethereum over the past year were said to have been created solely to dump investors.
Crypto Investors Spent $4.6B Buying ‘Pump and Dump’ Tokens Last Year
Cryptocurrency investors have poured as much as $4.6 billion into crypto tokens in 2022, allegedly part of a “pump and dump” scheme. A report on February 16 by blockchain analytics firm Chainalysis “analyzed all tokens launched” in 2022 on the BNB Smart Chain and Ethereum blockchains and found that more than 9,900 tokens have features of the “pump and dump” scheme.
In pump-and-dump schemes, developers typically orchestrate misleading claims, hype, and fear of missing out (FOMO) campaigns to persuade investors to buy their tokens and sell the scheme, secretly inflating the stake in the price. Chainalysis estimates that investors spent $4.6 billion worth of cryptocurrencies to buy over 9,900 different questionable tokens the company has identified. The most prolific pump-and-dump creator identified by Chainalysis (who hasn’t been named) is suspected of single-handedly launching 264 such tokens in the past year.
“Teams launching new projects and tokens can remain anonymous, which makes it possible for serial offenders to carry out multiple pump and dump schemes.” – the company explained.
Chainalysis classified a token as being “worth analyzing” as a potential “pump and dump” if there are at least 10 swaps and 4 consecutive days of trading on a decentralized exchange (DEX) in the week after launch. Of the 1.1 million new tokens issued last year, over 40,500 met the criteria.
If the price of this group of tokens dropped more than 90% in the first week, Chainalysis considered it likely that the token was in a “pump and dump”. The company found that 24% of 40,500 tokens analyzed met the secondary criteria. Despite the troubling stats, the company said in a separate report that cryptocurrency fraud revenues nearly halved in 2022, largely due to falling cryptocurrency prices.
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