How serious is "pump and dump" in the cryptocurrency industry? Chainalysis statistics show that suspicious tokens account for 24% of the total.

The blockchain data analytics firm Chainalysis, in its latest report, has compiled statistics on the phenomenon of "pump and dump" in the cryptocurrency industry. It found that this practice is prevalent across all tokens and is often carried out by the same group of people.

Malicious Pump and Dump Cases

Malicious activities of inflating and then dumping financial assets are not uncommon in both traditional finance and the crypto industry. The initial holders of these assets usually engage in various marketing hype to boost investor interest, profit from selling at inflated prices far above the valuation.

However, such behavior is even more prevalent in the unregulated crypto industry when compared. Bad actors manipulate market capitalization and prices by providing initial trading volume and controlling circulation, while maintaining anonymity to reduce their own risks, making pump and dump schemes more common in recent years.

Chainalysis has showcased a pump and dump case in its latest article, demonstrating the complete process of pump and dump through the Chainalysis Storyline transaction tracking visualization tool.

Chainalysis revealed that in December 2021, the token issuer activated the smart contract for the token and added liquidity on a DEX. After hundreds of investors purchased the token on the DEX, driving up the price, the token issuer dumped their tokens on the same day, causing investors to suffer losses.

High Prevalence of Pump and Dump Across All Tokens

With this phenomenon becoming more frequent in recent years, Chainalysis analyzed new tokens launched on the Ethereum and Binance Smart Chain in 2022. To exclude tokens that do not meet trading demand or are unattractive, they filtered tokens based on the condition of "having at least 10 trades within one week of release and trading for four consecutive days," resulting in a total of 40,521 qualifying tokens.

To identify tokens exhibiting pump and dump behavior, further filtering was done based on the condition of "price dropping by 90% within one week of release," revealing that such tokens accounted for 24%, or 9,902 tokens.

While it cannot be definitively stated that all these tokens engage in malicious pump and dump schemes, analyzing so many tokens individually is challenging.

Therefore, Chainalysis listed the top 25 tokens with the highest weekly drop in value through the token monitoring site Token Sniffer, and upon inspection of Token Sniffer's assessments, it was found that these tokens exhibited severe pump and dump behavior.

Many of these tokens' smart contracts contain malicious code that prevents users from selling the tokens after purchase, a clear indicator of pump and dump behavior.

Repeated Malicious Behavior by the Same Group

According to Chainalysis' data, investors spent a total of $4.6 billion on these 9,902 tokens showing signs of pump and dump, resulting in token issuers earning approximately $30 million.

Furthermore, Chainalysis discovered that malicious actors were continuously profiting through the same behavior by investigating wallets that provided initial token liquidity.

With only 445 individuals or groups involved in 2,376 potential pump and dump events, the most prolific bad actors launched 264 tokens in 2022 alone.