A report out today by Chainalysis makes grim reading for an industry trying to onboard new users.
The 2023 Crypto Crime Report suggests that in 2022, approximately 25% of all new crypto tokens were pump-and-dump schemes.
Considering Chainalysis strict criteria for inclusion as a pump-and-dump, it is likely that the number is much higher.
The crypto analysis firm analyzed all tokens launched on Ethereum and BNB and in 2022. Tokens were only included if they achieved a minimum of ten swaps and four straight trading days within a week of launch. Based on those rules, the total number of tokens fell to 40,521.
After that, only tokens which saw a 90% price drop — or more — in the first week of trading qualified. Based on those parameters, 9,902, or 24%, of the 40,521 tokens worth analyzing were indicative of pump-and-dump activity.
One Fraudster Could Be Behind 264 Schemes
A pump and dump in crypto is when a group of people work together to artificially inflate the price of a digital asset. They create hype and excitement before selling the asset off at a profit, leaving others with losses. It is considered a form of securities fraud and market manipulation, and is illegal in most countries.
Unfortunately, pump-and-dump schemes have become common in crypto. It’s easy for bad actors to launch a new token, control supply, and trade volume, and establish a high price. Anonymous teams make it possible for repeat offenders to carry out multiple schemes without repercussions.
Chainalysis identified one fraudster who was potentially behind up to 264 pump-and-dump schemes in 2022.
Tell-tale signs of a pump and dump include a sudden spike in hype and price, a sudden increase in trading volume, and a lack of fundamentals that would make that token worth purchasing.
You can read the full report here.
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