Market manipulation remains a persistent issue in the cryptocurrency industry, with suspected wash trading accounting for up to $2.57 billion in trading volume across multiple blockchains in 2024, according to a new report from Chainalysis.

The report highlights the scale and complexity of market manipulation in decentralized finance (DeFi), particularly through wash trading and pump-and-dump schemes. While DeFi’s transparency offers a unique window into trading behaviors, the pseudonymous nature of blockchain transactions makes proving intent difficult. 

However, using on-chain heuristics, Chainalysis identified suspicious trading patterns across Ethereum, BNB Smart Chain (BNB), and Base, suggesting that wash trading may be concentrated in specific liquidity pools and driven by a small number of actors.‍

Wash Trading: Inflating Volume with No Real Demand

Wash trading occurs when traders repeatedly buy and sell the same asset to artificially boost trading volume, creating the illusion of demand. While regulators have long struggled to detect this form of market manipulation in traditional finance, the crypto industry presents additional challenges due to decentralized exchanges (DEXs), which lack the centralized oversight of their traditional counterparts.

Chainalysis used two distinct methodologies to uncover potential wash trading. The first heuristic tracked wallets that executed near-identical buy and sell transactions within a short timeframe. This analysis suggested that roughly $704 million in wash trades took place on Ethereum, BNB, and Base in 2024, spread across 1,000 to 1,800 liquidity pools each month. A single wallet was found executing more than 54,000 rapid transactions—a highly suspicious pattern indicative of wash trading.

The second heuristic focused on addresses using token multi-senders—tools originally meant for bulk payments but frequently exploited to distribute funds across multiple addresses in an attempt to disguise coordinated trading. This methodology identified an additional $1.87 billion in suspected wash trading, bringing the total upper estimate to $2.57 billion.‍

Pump-and-Dump Schemes: The Rug Pull Reality

Beyond wash trading, Chainalysis also investigated pump-and-dump schemes—coordinated efforts to inflate the price of a token through hype before insiders offload their holdings, leaving unsuspecting investors with worthless assets. The report found that 4.52% of all tokens launched in 2024 showed characteristics linked to pump-and-dump activities.

The analysis revealed that nearly 90% of liquidity pools involved in suspected pump-and-dump schemes were rugged by the same address that created them, suggesting many tokens were designed with fraudulent intent from inception. While some schemes lasted several months, the majority were abandoned within a week, reflecting the short-lived nature of many pump-and-dump operations.