• Chainalysis, a blockchain analysis firm, found that 25% of the digital tokens introduced in 2022 were scams designed to make off with investor funds.
• These scams involve developers or executives talking up the token and getting investors interested, then running away with their money once the price of the token has risen.
• Pump-and-dump schemes are seen as destructive to the reputation of cryptocurrency and could be preventing mass adoption.
Chainalysis Report: Most Tokens in 2022 Were Fake
Chainalysis, a blockchain analysis firm, recently released a report detailing its findings on digital tokens introduced in 2022. According to their research, nearly 25 percent of these tokens were fake – scams set up to defraud investors out of their money.
Many of these tokens had clear signs of being pump-and-dump schemes. In such schemes, developers or executives talk up a certain token and get investors excited about it – often through fear of missing out (FOMO). Then when enough people have put their money into it and the price has risen significantly, the scammers shut down the operation and run away with everyone’s funds.
Ease Of Execution
Chainalysis noted that pump-and-dump schemes are easy for bad actors to execute due to how simple it is to launch new tokens and establish an artificially high market capitalization for them by controlling supply levels. Furthermore, teams launching new projects can remain anonymous which makes it possible for serial offenders to carry out multiple pump-and dump schemes.
Destructive To Crypto Industry Reputation
The company also pointed out how damaging this is for crypto’s reputation since pump-and -dump schemes have become so common within this industry. Many believe that cryptocurrency is approaching an inflection point that could spark mass adoption but if people perceive crypto as full of fraudsters looking to take advantage of unsuspecting newcomers then this will be difficult to achieve.
The report discussed more than one million transactions from over 1,000 digital asset addresses related to pump-and -dump schemes in 2021 alone showing just how widespread these scams really are. It’s important for investors and traders alike to be aware of suspicious activity surrounding any given crypto asset before investing in it so they don’t fall victim themselves.