A recent study highlights that approximately 89% of decentralized exchange (DEX) pools implicated in potential pump-and-dump schemes are exploited by their original creators. An additional 11% appear to be manipulated by addresses financially linked to the pool's creator or token deployer. The report also suggests potential coordination in some cases, where the same funding source supports both the pool creator and the exploiter, targeting unsuspecting users.
Once a DEX pool is launched, the related token is abandoned within a timeframe of a few days to several months, averaging about six to seven days. However, 1% of these schemes can last as long as four to five months, according to Chainalysis' latest findings, shared with CryptoPotato. In 2024, over 3 million tokens were created within the blockchain ecosystem, with 42.54%—about 1.29 million—being listed on a decentralized exchange.
Ethereum led token creation in 2024, bolstered by the user-friendly ERC-20 standard. Although Ethereum remains dominant for tokens traded on DEXs, chains like BNB and Base have also seen significant activity. Several hundred thousand tokens were launched each month on these chains, with July exceeding 400,000 new releases.
Despite this surge, Chainalysis noted that only 1.7% of these tokens were actively traded last month. This inactivity raises questions about the abundance of dormant tokens, with possibilities ranging from abandonment due to lack of interest to orchestrated short-term schemes like pump-and-dump or rug pulls.
Wash trading, comparable to pump-and-dump tactics, remains a prevalent form of market manipulation in the digital asset landscape. Chainalysis applied two heuristic methodologies to unearth approximately $2.57 billion in suspected wash trading activity. While academic research has primarily focused on centralized exchanges (CEXs), where strategies typically aim to inflate trade volumes, decentralized exchanges (DEXs) also experience wash trading despite the additional cost of gas fees.
Regulatory bodies and law enforcement agencies have increased scrutiny over wash trading practices. On October 9 of the previous year, the US Securities and Exchange Commission (SEC) charged four market makers—ZM Quant, Gorbit, CLS Global, and MyTrade—with artificially boosting token trade volumes.
The Internal Revenue Service (IRS) later discovered the scheme involved 18 entities and individuals, connecting operations in the UK and Portugal.