Over Half of Tokens Listed on DEXes Could Be Pump and Dumps
A recent report by Chainalysis reveals that more than half of the tokens listed on decentralized exchanges (DEXes) show signs of potential pump and dump schemes. However, these tokens only represent 1.3% of the total trading volume on DEXes, indicating that investors are primarily putting their money into trusted tokens.
Chainalysis Crime Report Examines Pump and Dump Tokens
The Chainalysis Crime Report analyzes over 160,000 tokens available for trade on DEXes in 2023. It found that those behind pump and dump schemes collectively made $241.6 million in profit, averaging around $2,500 each. Most dumps occurred within the first few weeks of a token’s launch.
Defining Pump and Dump Behavior
Chainalysis researchers defined three on-chain criteria to identify pump and dump behavior. These include multiple purchases by unrelated users, a single address removing significant liquidity, and current liquidity levels below $300. However, more factors must be considered before legally labeling a token as a pump and dump.
Spotting Red Flags and Wash Trading
A major red flag for pump and dump schemes is wash trading, which involves artificial buying and selling to inflate a token’s value. On-chain data can help identify these patterns. By examining transaction data and utilizing public tools like those offered by Chainalysis, investors can educate themselves and assess potential risks.
A Warning for Investors and a Message to Policy Makers
The report serves as a warning for investors to conduct thorough research before investing in unestablished tokens. Additionally, it emphasizes the transparency of blockchain data in identifying pump and dump schemes. Chainalysis believes this information should be conveyed to regulators and policy makers to dispel negative perceptions of cryptocurrency.
Hot Take: Pump and Dump Schemes Exposed on DEXes
Chainalysis’ report reveals that pump and dump schemes are prevalent on decentralized exchanges, with over half of listed tokens showing suspicious patterns. However, these tokens account for a small portion of trading volume. The report highlights the importance of conducting due diligence as an investor and emphasizes the transparency of blockchain data in identifying fraudulent activities. Regulators and policy makers should take note of the ability to use on-chain data to combat pump and dump schemes, ultimately promoting market integrity within the crypto industry.
By
By
By
By
By