• According to a new report issued by blockchain analysis firm Chainalysis, nearly 25 percent of digital tokens introduced in 2022 were scams.
• These scams are known as pump-and-dump schemes, which involve developers or executives talking up a token and getting investors interested before running off with the money.
• Chainalysis says that these schemes have hindered the reputation of the crypto industry and could make it difficult for mass adoption to occur.
Chainalysis: Most New Tokens in 2022 Were Fake
A new report issued by blockchain analysis firm Chainalysis revealed that nearly 25 percent of digital tokens introduced in 2022 were fraudulent scams designed to take investor funds. These scams, known as pump-and-dump schemes, involve developers or executives talking up a token and getting investors interested before running off with the money. Chainalysis believes this has significantly hindered the reputation of the crypto industry and could make it difficult for mass adoption to occur.
What Are Pump-and-Dump Schemes?
Pump-and-dump schemes involve developers or executives talking up a token and getting investors interested due to fear of missing out (FOMO). This leads to enough investors being involved that the price rises significantly. At this point, developers stop minting the token, shut down the operation, and run off with all of the funds they’ve made from people investing in their token.
The Impact on Crypto Adoption
Chainalysis explains that pump-and dump schemes are uniquely destructive within cryptocurrency due to how easy it is for bad actors to launch new tokens and create an artificially high market capitalization for them on paper by controlling circulating supply and seeding initial trading volume. Additionally, teams launching new projects can remain anonymous which makes it possible for serial offenders to carry out multiple pump and dump schemes. This has caused many people to perceive cryptocurrency as rife with such malicious greed which may make it difficult for mass adoption to occur if public perception remains negative towards crypto assets.
Chainalysis‘ report discusses more than one million separate transactions across 668 different types of tokens released during 2022 which showed signs of being part of a scam or fraud scheme similar to what was described above. Knowing what type of red flags can be seen when analyzing such transactions is an important part of safeguarding one’s investments against falling prey such scams.
Crypto fraud is becoming increasingly prevalent according to Chainalysis‘ findings from their recent report on digital tokens introduced in 2022 – where nearly 25% were found to be fraudulent pump-and dump schemes targeting innocent traders who end up losing their money when developers run off with all the profits made from their scheme. It’s essential for investors looking into cryptocurrencies know what types of red flags exist so that they can protect themselves from falling victim to such malicious activity within the space