Feb 17, 2023

$4.6B Invested in Crypto Tokens Suspected of “Pump and Dump” Schemes

Cryptocurrency investors lost an estimated $4.6 billion in 2022 due to “pump and dump” schemes, according to a Feb. 16 report by blockchain analytics firm Chainalysis. The report analyzed all tokens launched on the BNB Smart Chain and Ethereum blockchains and identified over 9,900 tokens that bore characteristics of a “pump and dump” scheme.

A “pump and dump” scheme typically involves the creators of the token promoting it by making false or misleading statements, creating hype, and instilling fear of missing out (FOMO) among investors, while secretly selling their own stake in the scheme at inflated prices.

Chainalysis estimated that investors spent $4.6 billion worth of crypto buying the nearly 9,900 different suspected fraudulent tokens. The firm identified one prolific creator who is suspected of launching 264 such tokens in 2022 alone.

To identify a token as a possible “pump and dump”, Chainalysis looked for tokens that 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 over 40,500 fit the criteria.

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

The firm estimated that just 445 individuals or groups were behind the suspected pump-and-dump tokens and that they made $30 million in total profits from selling their holdings.

Despite the concerning statistics, a separate report by Chainalysis noted that revenues from crypto scams were cut almost in half in 2022 largely due to depressed crypto prices.

The prevalence of “pump and dump” schemes has led to an increased demand for NFT marketing services, such as those provided by web3 agencies. These agencies offer a range of services, from helping creators promote their NFTs on social media platforms such as Twitter to helping them sell their NFTs.

They also provide valuable insights on the best strategies for maximizing the value of an NFT and advise creators on how to best protect their NFTs from malicious actors.

In addition to the services provided by web3 agencies, there are a number of other strategies that creators can use to protect themselves from “pump and dump” schemes. These include avoiding investing in tokens that have been launched within the last week, conducting thorough research on the team behind a token, and only investing in tokens that have a proven track record of success.

Ultimately, it’s up to creators to take the necessary steps to protect themselves and their investments from “pump and dump” schemes. By doing so, they can ensure that their NFTs remain valuable and profitable.

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.