• Chainalysis‘ recent report revealed that 24% of tokens launched in 2022 experienced a significant price decline within the first week of launch.
• The report suggests that these price drops are likely due to pump-and-dump (P&D) schemes.
• An analysis of the 25 tokens with the most significant price drops showed they lacked trustworthiness and had honeypot coding to prevent new buyers from selling their tokens.
Almost 25% of Tokens Launched in 2022 Resembled P&D Schemes
Chainalysis’ recent report revealed that 24% of over one million tokens launched in 2022 experienced a significant price decline within the first week of launch. This suggests that these declines may be attributed to pump-and-dump (P&D) schemes, which occur when holders promote an asset with misleading statements causing a rise in its value before selling it at an overvalued price, resulting in its subsequent crash.
Analysis of Tokens Showed They Lacked Trustworthiness
An analysis was conducted on the 25 tokens with the most significant price drops within their first week; this analysis revealed that these projects lacked trustworthiness and contained “honeypot” coding preventing new buyers from selling their tokens. Furthermore, data points indicated 445 unique wallets belonging to either individuals or groups were responsible for 24% of all the 9,902 detected P&D scheme resembling tokens — with one wallet responsible for launching 264 such tokens alone in 2022.
Pump & Dump Schemes May Have Influenced Token Prices
These findings suggest that P&D schemes may have affected token prices as soon after they were listed on exchanges — while some market conditions can also affect prices negatively, there is reason to believe that P&Ds caused some of them. Due to this, regulators have stepped up efforts to monitor crypto markets and crack down on any illegal activities taking place therein.
How Can Investors Protect Themselves?
Given what has been discussed thus far, it is imperative for investors who wish to partake in cryptocurrency trading and investments do so responsibly by conducting thorough research into any project before investing funds into it; doing so will help ensure investors make well informed decisions and protect themselves against potential scams or fraudulent activity.