Majority Of New Tokens In 2022 Were Fraudulent, Says Chainalysis
21 February 2023 - 3:20AM
NEWSBTC
2022 saw the launch of over one million new tokens. However, a
study by blockchain analytics firm Chainalysis revealed that many
of the new crypto tokens looked like pump-and-dump schemes. In the
new study, Chainalysis evaluated numerous new tokens that started
in 2022 and discovered that 24% had pump and dump features.
According to the report, most of these coins plummeted by 90%
within the first week of launch after their developers dumped their
holdings. Related Reading: XRP Price Still Looks Bearish, But This
Ripple Visa Rumor Might Change It More Than 9,000 Newly Launched
Tokens In 2022 Were Rug Pulls According to Chainalysis’ report,
2022 saw more than 1.1 million new coins on Ethereum and BNB Chain.
The blockchain analytics firm evaluated the new crypto projects
based on the number of trading days and swaps the week after their
launch. After evaluating the projects using 10 minimum swaps and
four consecutive trading days in a week after their launch,
Chainalysis made an interesting observation. Only 40,521 of 1.1
million new tokens gained traction within the evaluation period.
However, 24% (9,902) of the 40,521 tokens that gained popularity
witnessed a significant price decline in the first week after their
launch. Those are the characteristics of pump and dump
schemes. As per the report, a 90% or more decline in token
price indicates that the coin creators dumped their holdings
quickly. Also, Chainalysis noted that market forces could affect
tokens’ price movements regardless of the efforts of the developer
team to promote the coins. Related Reading: XRP Price Prediction:
Risk of Bearish Break Below $0.38 But the promotional strategies
for such coins are not always the same. Therefore, Chainalysis used
an evaluation service to score new tokens’ trustworthiness on a
0-100 scale. The firm evaluated 25 new crypto tokens. They all
scored zero, suggesting they were most probably pump-and-dump
projects. Furthermore, Chainalysis’s report revealed that victims
of the pump-and-dump projects invested about $4.6 billion in crypto
assets. These investors are stuck with losses while the creators
accumulated $30 million in profits after dumping their holdings. 8%
Of Ethereum Coins And 12% Of BNB Coins In 2022 Are Rug Pulls, Says
Solidus Cryptocurrency rug pull and pump-and-dump projects have
become a menace in the industry in recent years. Creators of
cryptocurrency pump-and-dump projects often start with promoting
and hyping the tokens with misleading advertisements and
statements. False profit projections and hype usually cause a rapid
surge in token prices as new investors join. Then, after gathering
enough investors, the project creators would sell their holdings,
acquiring massive profits and leaving investors with losses.
Solidus Lab’s Rug Pull Report suggests fraudsters deployed more
than 117,000 scam tokens in 2022. The report claims that the number
of scam tokens between January 1 and December 1, 2022, increased by
41% from what it was in 2021. Solidus’ study revealed that 8% of
all Ethereum tokens are rug pulls while 12% of BNB Chain tokens are
scams. The report suggests that the scammers behind these tokens
use crypto-to-fiat currency exchanges to execute their scams and
launder the funds. These fraudsters’ activities go unnoticed
because traditional scam identification approaches cannot detect
99% of their rug pull tokens. The report revealed that during the
study period, these scam projects saw total deposits and
withdrawals of up to $11 billion in ETH on 153 centralized crypto
exchanges. Featured image from Pixabay, Chart from
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