Feb 17, 2023

$4.6B Funneled Into Crypto ‘Pump and Dump’ Schemes

Cryptocurrency investors funneled an estimated $4.6 billion into crypto tokens suspected to be part of “pump and dump” schemes in 2022, according to a report from blockchain analytics firm Chainalysis.

Chainalysis analyzed all tokens launched on the BNB and Ethereum blockchains in 2022 and identified 9,900 tokens that bore characteristics of a “pump and dump” scheme.

A pump-and-dump scheme typically involves the creators of the token orchestrating a campaign of hype and Fear Of Missing Out (FOMO) to persuade investors into buying tokens while secretly selling their stake in the scheme at inflated prices.

The most prolific “pump and dump” creator identified by Chainalysis is suspected of launching 264 such tokens last year.

Chainalysis classified a token as being “worth analyzing” as a potential “pump and dump” if it had a minimum of 10 swaps and four back-to-back days of trading on decentralized exchanges (DEXs) in the week after its launch. Of the 1.1 million new tokens launched last year, only 40,500 fit the criteria.

If a token from this group saw a price decline in the first week of 90% or greater, Chainalysis deemed it likely the token was a “pump and dump.” The firm found that 24% of the 40,500 tokens analyzed fit the secondary criterion.

Chainalysis estimated that only 445 individuals or groups are behind the suspected pump-and-dump tokens — suggesting creators often launch multiple projects — and made $30 million in total profits from selling their holdings.

Despite the concerning statistics, the firm noted that revenues from crypto scams were cut almost half in 2022 largely due to depressed crypto prices.

The rise of NFTs, or non-fungible tokens, has created a new market for crypto investors and has also opened the door to new opportunities for scammers. As NFTs become more popular, crypto investors are increasingly turning to NFT marketing and promotion services to help boost the visibility of their tokens.

NFT marketing agencies are popping up to help NFT creators promote their tokens on social media platforms such as Twitter, where they can reach a larger audience and increase their chances of selling their tokens. These agencies offer a range of services, from creating promotional videos and graphics to running targeted ads and campaigns.

However, with the rise of NFT marketing agencies comes the potential for fraud and scams. Investors should do their due diligence and research any NFT marketing agency before signing up for their services. Additionally, investors should also be aware of the potential for pump-and-dump schemes in the NFT space and be wary of any NFT marketing agency that promises unrealistic returns.

In the end, investors should remember that the same rules apply to investing in NFTs as any other form of crypto asset: do your research, be aware of the risks, and never invest more than you can afford to lose.

Disclaimer: All investment or financial opinions expressed by MoonLanding Media are not recommendations and are intended for entertainment purposes only. Do your own research prior to making any kind of investment. This article has been generated based on trending topics, has not been fact checked and may contain incorrect information. Please verify all information before relying on it.