• Chainalysis’s report reveals that 25 percent of tokens introduced in 2022 were scams.
• The most common type of crypto fraud is the pump-and-dump scheme.
• These schemes have negatively impacted the reputation of the crypto industry and threatened mass adoption of cryptocurrency.
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. These fraudulent activities are known as pump-and-dump schemes, which involve developers or executives talking up an asset and then running away with investor money after the price has been artificially inflated.
What Is a Pump-and-Dump Scheme?
Pump-and-dump schemes involve getting investors interested in a token by creating fear of missing out (FOMO). This causes many investors to pour their money into it, leading to an artificial increase in its price. At this point, the developers or executives behind it will abruptly shut down operations and run away with all the money they made from unsuspecting traders.
The Impact on Crypto Reputation
Chainalysis stated that these schemes are particularly destructive for the crypto world due to its easy launch process and lack of transparency when it comes to teams launching new projects and tokens. Unfortunately, these scams have caused people to perceive cryptocurrency as being rife with fraudulent activities, making it difficult for mass adoption to be achieved.
Red Flags to Look Out For
The report also offered some advice on how investors can spot potential scam coins before investing their hard earned money into them: look out for any sudden changes in trading volume, be aware if there is no actual utility behind a token, do research into who is actually developing a project before investing in it, and look at any red flags such as suspicious online marketing campaigns or large amounts of premined tokens.
Conclusion
Crypto fraud can take many forms but pump-and-dump schemes remain one of the most common types around today. Investors should always exercise caution when investing their funds into any kind of digital asset and do research beforehand so they don’t fall victim to malicious greed.
