Almost 25% of new crypto in 2022 could have been “pump and dump”, study shows
According to the latest study conducted by Chainalysis, unwitting users spent around $4.6 billion in crypto and obtained it in fraudulent schemes last year that saw the creation of over 1.1 million tokens.
Chainalysis’ study shows that about 25% of these cryptocurrencies reflected “pump and dump” tendencies, and the vast majority of them failed, and their creators stole $30 million from their victims.
Based on exchange transactions, fewer than 41,000 of the more than 1 million tokens in circulation in 2022 were deemed to have no significant impact on the cryptocurrency market.
A table showing the analytic breakdown and number of tokens suspected to be fraudulent. Source: Chainalysis
They were all ‘carpet covers’
A “rug pull” or “pump and dump” scheme is a type of crypto scam. When enough ordinary people buy into a cryptocurrency, market manipulators “pull the curtain” and sell their tokens, making off with the investors’ money.
“Pump and dump schemes have also become common in the crypto world,” Chainalysis analysts wrote in a report published Thursday. That should come as little surprise to watchers of crypto markets, where huge peaks based on rumors and hype can quickly disappear.
In 2018, Chainalysis researched cryptocurrency pump and dump schemes and studied 175 malicious incidents that occurred between January 2018 and July 2019, discovering that these schemes generated an estimated $825 million in trading activity.
Between January 1, 2021 and March 31, 2022, over 46,000 people reported cryptocurrency scams. In that year alone, it was claimed that $680 million was lost to fraudsters. In the first three months of 2022, another $329 million was lost to fraudsters.
Pump & Dump – Easy to perform?
Chain analysis researchers revealed that the prevalence of blanket pulling can be largely attributed to the ease with which bad actors can introduce new digital assets and establish an artificially high price and market value for it “on paper” by filling the initial trading volume and controlling the circulating supply. .
According to the researchers, 25%, or over 10,000, of the tokens released in 2022 experienced a price loss of 90% or more in the first week of trading. They emphasized that in the digital currency realm, those proposing initiatives can remain anonymous.
The market has been rocked by many high-profile fraud allegations this year, including alleged schemes involving FTX and Celsius, and this latest study of bitcoin fraud does little to inspire confidence in the industry.
Crypto total market cap at $1 trillion on the daily chart | Chart: TradingView.com
Risk related to crypto assets
In January, the US central bank, the Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency issued a joint statement saying the risks associated with digital assets should not be allowed to spill over into the wider financial system.
According to a national poll conducted late last year by the Crypto Council for Innovation in Washington, DC, more than half of voters who hold cryptocurrency want action and protection against fraudsters.
– Featured image from Zipmex
