Chainalysis Crime Report: 54% Tokens Launched In 2023 May Be Pump And Dump Schemes

Key Points:

• The Chainalysis Crime Report highlights that over 50% of tokens listed on DEXs exhibit patterns resembling potential pump and dump schemes.
• Between January and December 2023, Ethereum witnessed a surge in token launches.

In a recent Chainalysis Crime Report, it was revealed that over half of the tokens listed on decentralized exchanges (DEXs) exhibit patterns indicative of potential pump and dump schemes.

The Chainalysis Crime Report, which previews findings from the New Crypto Crime Report, specifically examines market manipulation within the Ethereum ecosystem.

Between January and December 2023, a staggering 370,000 tokens were launched on Ethereum, with around 168,600 of them tradable on at least one DEX. The monthly token launches have shown an upward trend since mid-2022, reaching peaks of nearly 50,000 per month.

However, not all these tokens gain significant traction, as less than 14.1% achieve over $300 in DEX liquidity within a month. Only 5.7% of tokens launched in 2023 currently surpass this threshold, highlighting liquidity challenges.

While the Chainalysis Crime Report identifies concerning patterns associated with potential scams—54% of tokens display such signs—it’s noteworthy that these tokens only contribute to 1.3% of the total DEX trading volume. Investors seem to be favoring trusted tokens on exchanges, despite the prevalence of possible scams.

Chainalysis researchers outlined three on-chain criteria for identifying pump and dump behavior. First, a token must be purchased at least five times by DEX users unconnected to the token’s major holders, indicating external pumping. Subsequently, a single address must remove over 70% of liquidity, signifying the dump phase. Lastly, the current liquidity must be $300 or less, suggesting limited activity.

Market manipulation, including pump and dump schemes, poses a threat to crypto markets, but the inherent transparency in cryptocurrencies offers an opportunity to build safer markets. With monitoring tools, market operators and government agencies can identify and prioritize areas for investigation.