According to the most recent analysis that Chainalysis carried out, unsuspecting individuals spent over $4.6 billion worth of cryptocurrency to acquire it through fraudulent schemes in 2018, which resulted in the creation of over 1.1 million tokens.
According to the findings (1) of the study conducted by Chainalysis, around 25 percent of these cryptocurrencies exhibited "pump and dump" tendencies. The vast majority of these cryptocurrencies were unsuccessful, and the inventors of these cryptocurrencies stole $30 million from their victims.
It was determined that less than 41,000 of the more than one million tokens in circulation in 2022 had no significant impact on the bitcoin market by analyzing the transactions that took place on exchanges.
Rug Pull or Pump and Dump
One type of cryptocurrency scam is known as a "rug pull," while another is a "pump and dump." When a sufficient number of average people invest in a cryptocurrency, scammers will "take the rug out from under" them and sell their tokens, taking the investors' money with them.
According to research released on Thursday by Chainalysis, the company's experts said, "Pump and dump techniques have also grown prevalent in the realm of cryptocurrency."
Those who keep an eye on the cryptocurrency markets shouldn't be too surprised by this development because enormous price surges caused by rumors and hype can swiftly disappear.
Chainalysis researched bitcoin pump and dump schemes in 2018 and analyzed 175 harmful events between January 2018 and July 2019. They found that these schemes were responsible for an estimated $825 million in trading activity.
Almost 46,000 people reported bitcoin fraud between the 1st of January 2021 and the 31st of March 2022. It was said that con artists were responsible for losing $680 million in only that year, and Fraudsters were responsible for losing an additional $329 million during the first three months of 2022.
Is it so Easy to Create a Pump and Dump Token?
Researchers from Chainalysis found that the prevalence of rug pulls is due primarily to the easiness with which malicious actors can bring in new tokens and create an extraordinarily inflated price and market capitalization for it "on paper" by inundating the initial trade quantity and managing the circulating supply.
According to the researchers' findings, during the first week of trading for at least 25 percent, or over 10,000, of the tokens that were issued in 2022, their prices dropped by 90 percent or more. They noted that those who propose initiatives in the digital currency world could do so while remaining anonymous.
This year, the market has been jolted by several high-profile fraud accusations, including allegations involving multiple FTX and Celsius. This most recent report on bitcoin fraud does little to encourage trust in the industry.
The Office of the Comptroller of the Currency, the Federal Reserve Bank of the United States, and the Federal Deposit Insurance Corporation published a joint statement in January stating that the risks connected with digital assets should not be allowed to spread to the larger financial system.
According to a national survey conducted around the end of the previous year by the Crypto Council for Innovation in Washington, D.C., more than half of voters who possess cryptocurrencies want action and protection against fraudsters.