Crypto Investors put their money into pump and dump scheme worth $4.6 billion in 2022

In recent years, cryptocurrency has become a popular way to invest and make money.
However, with the rise in the popularity of cryptocurrency, there has also been a rise in fraudulent activity.

The pump and dump scheme

One of the most common forms of fraud in the crypto world is the “pump and dump” scheme, in which a group of investors artificially inflate the value of a low-priced token, only to sell it off at a profit once the price has risen. According to a recent report, crypto investors spent $4.6 billion buying “pump and dump” tokens in 2022 alone.

The report, which was released by Chainalysis, a blockchain analysis company, analyzed over 10 million transactions across 200 exchanges to identify instances of pump-and-dump schemes. The report found that while these schemes accounted for only 0.3% of all cryptocurrency transactions, they resulted in significant losses for investors. In 2022 alone, investors lost $1.9 billion to these schemes.

The report also found that these schemes tend to target low-value tokens, which are easier to manipulate. These tokens often have little or no real-world use or value, and their prices are easily influenced by even small amounts of buying and selling. In some cases, the schemes are organized through social media groups or chat rooms, where investors coordinate their buying and selling to create artificial demand.

While the pump-and-dump scheme has been around for years, the rise of cryptocurrency has made it easier for scammers to target unsuspecting investors. Cryptocurrency is still largely unregulated, and many investors are not familiar with the risks involved in buying and selling digital assets. This has created an environment where scammers can take advantage of investors who are looking to get rich quickly.

So, what can investors do to protect themselves from these schemes?

The first step is to do your research. Before investing in any cryptocurrency, it is important to understand its value, potential for growth, and any risks associated with it. This will help you avoid investing in low-value tokens that are more susceptible to pump-and-dump schemes.

Investors should also be wary of any investment opportunities that promise quick and easy returns. While it is possible to make money in cryptocurrency, it is important to remember that it is a high-risk investment. There are no guarantees, and investors should be prepared to lose their entire investment.

Another important step is to only invest what you can afford to lose. This means setting a budget for your cryptocurrency investments and sticking to them. It also means avoiding taking on debt or investing money that you need for essential expenses.

Finally, it is important to be cautious of any investment advice or recommendations that come from unknown or unverified sources. Many pump-and-dump schemes are organized through social media or chat rooms, where scammers can easily manipulate unsuspecting investors. It is important to do your research and only invest based on your own analysis and understanding of the market.

Conclusion

In conclusion, while the rise of cryptocurrency has created many new investment opportunities, it has also created new risks for investors. The pump-and-dump scheme is just one of the many types of fraud that investors need to be aware of. By doing your research, investing cautiously, and being wary of investment advice from unknown sources, you can help protect yourself from these scams and make more informed investment decisions.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing