• Chainalysis has released a report showing that 25% of tokens issued in 2022 were scams.
• These scams are known as pump and dump schemes, where developers manipulate prices by artificially increasing the token’s price to get investors interested, before running away with their money.
• Pump and dump schemes have significantly damaged the reputation of the crypto industry and could make it difficult for mass adoption to take place.
Chainalysis: Most New Tokens in 2022 Were Fake
A new report issued by blockchain analysis firm Chainalysis shows that nearly 25 percent of digital tokens introduced in 2022 were scams designed to make off with investor funds.
Pump and Dump Schemes
These scams, also known as pump-and-dump schemes, involve developers or executives of a crypto asset talking up its value, getting investors interested and then running away with their money after the token’s price reaches an artificially high level. The ease of launching new tokens anonymously makes it possible for serial offenders to commit multiple pump-and-dump schemes.
Damage to Crypto Reputation
According to Chainalysis, these pump-and-dump schemes have been particularly destructive due to the social media driven nature of crypto investment news and discussion. This has led many people to view cryptocurrency as rife with such fraudulent activities which could make it difficult for mass adoption to take place.
The report also discussed more than one million SEPA transfers which showed signs of being used for pump-and-dump scheme purposes – such as unusually large amounts sent from exchanges or wallets associated with fraudsters in the past.
Overall, this is a worrying development that highlights how vulnerable investors can be when dealing with cryptocurrency assets. Careful research should always be done prior investing into any type of asset, but especially those involving digital currencies which have been frequently targeted by fraudsters in recent years.