Over Half of ERC-20 Tokens on DEXes Linked to Pump and Dump Schemes
Data from Chainalysis reveals that in 2023, out of the 370,000 tokens launched on the Ethereum blockchain, approximately 168,600 were available for trading on decentralized exchanges (DEXes). Shockingly, around 53.4% of these ERC-20 tokens were associated with crypto pump and dump schemes. This means that scammers artificially inflated the price of these tokens before selling off their holdings for a profit.
In total, these pump and dump schemes generated $241.6 million in profits. However, when considering each token individually, the average profit per scammer was only $2,672. Despite this relatively low figure, these manipulation schemes accounted for 1.3% of all trading volume on Ethereum DEXes.
Identifying Crypto Pump and Dump Activity
Chainalysis has observed a decrease in the number of new tokens meeting the criteria for crypto pump and dump schemes since mid-2023. However, the current value is still higher than in 2022. To identify these schemes, Chainalysis looks for tokens that are repeatedly purchased by unrelated DEX users.
One key indicator is when the largest holder withdraws over 70% of liquidity within a week of launch, leaving only $300 liquidity. This suggests a significant reduction in trading activity and raises suspicions of a pump and dump scheme. It’s important to note that while pump and dump is prevalent, other types of attacks have also occurred in the crypto industry recently.
Hot Take: Rising Crypto Crimes Highlight Need for Enhanced Security Measures
The prevalence of pump and dump schemes on decentralized exchanges raises concerns about market manipulation and investor protection. While Chainalysis has provided valuable insights into identifying these schemes, it is clear that more needs to be done to prevent such fraudulent activities.
Moreover, the recent attacks on Solana Phantom wallet and Manta Network highlight the broader vulnerabilities within the crypto industry. These incidents emphasize the urgent need for enhanced security measures to protect users’ assets and ensure the integrity of decentralized systems. As the crypto market continues to evolve, it is crucial for regulators, developers, and users to work together in implementing robust security protocols that can effectively combat various forms of crypto crimes.
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