​Chainalysis: 24% of tokens launched in 2022 are associated with Pump & Dump schemes

What’s new? Analytics company Chainalysis published a report with information on the number of tokens with signs of the fraud scheme, Pump & Dump. According to Chainalysis, 24% of the 40521 tokens launched in 2022 had a price drop in the first week after launch, indicating the possible use of the scheme.

The full version of the report

Pump & Dump is a manipulative scheme to raise the rate followed by a price collapse. Fraudsters use social media, celebrity endorsements, and false information to create a stir around an asset and raise its price. Large asset owners artificially raise the value of assets (“pump”) to sell them later to interested investors. As a result, the value declines or depreciates (“dump”) and investors lose money.

What else is known? In their analysis, analysts note that more than 1,1 million tokens were launched in total in 2022, but the vast majority “got virtually no traction.” Experts took only those projects that made an impact on the crypto ecosystem and had at least ten swaps on decentralized exchanges (DEXs) and four consecutive trading days within one week of launch.

Including this criterion, the number of tokens that entered the market last year dropped from 1,1 million to 40 521. The next criterion assessed by Chainalysis was a sharp price drop of 90% or more in the first week of trading.

Taking into account all the criteria, the analysts concluded that 9902 projects fall under possible Pump & Dump schemes. At the same time, part of the tokens initially contained malicious code that did not allow the buyers of the token to sell it later — such a fraudulent scheme is called Honeypot. According to Chainalysis estimates, the creators made a total of $30 million in profits from selling tokens before their value fell.

Earlier, Chainalysis estimated the amount of funds related to illegal activities in the field of digital assets. In 2022, this figure reached a record high of $20,1 billion. The growth is associated with an increased number of transactions by companies under US sanctions. In this, the number of such transactions has been growing for the second year in a row.

For what Pump & Dump is and how to avoid fraud in this sphere, read GetBlock Magazine’s special feature.