2021 has no doubt been the year for crypto scams. There were so many reported scams that involved users losing up to billions of dollars for the year, but none did as well as the rug pulls that followed the decentralized finance (DeFi) popularity.
Scams like these where investors put money in a project and then developers made off with the money were rampant for the year. Countless projects have met their end this way, one of the most popular being the Squid Game project.
Related Reading | U.S. Big Banks To Use Blockchain For Interbank FX Settlements
According to a new report by blockchain firm Chainlysis, the number of scams has almost doubled since 2020. These scams have gotten progressively shorter lifespans too, with the average scam lasting for 70 days in 2021 compared to 192 days in 2020.
Rug Pulls Dominating 2021
Rug pulls have been the most dominated scams for the year 2021. Propelled forward by the popularity of DeFi, these projects have found a new way to take advantage of unsuspecting investors. The space is still developing and still in its infancy which gives room for bad actors to come across as seemingly ‘legit’ projects to scam users.
These types of scams have grown prevalent with the 2021 bull market, accounting for more than $2,8 billion stolen from victims. Rug pulls accounted for 37% of all crypto scams in 2021. In contrast, rug pulls only accounted for 1% of all cryptocurrency scams in 2021.
Rug pulls made up 37% of all crypto scams in 2021 | Source: Chainalysis
The major pull for investors to these projects is the hope of making a large return when these projects do eventually take off. However, developers drain the liquidity from the contracts, sending the price of the token to zero, and leaving investors with a bunch of worthless coins.
Crypto Scams On The Rise
Compared to 2020, crypto scams in 2020 have grown 81% 2021, almost doubling that of the previous year. Scams like investment scams and Ponzi schemes have dominated the space. Reports show that $7.7 billion worth of cryptocurrencies was lost this year to these scams.
Related Reading | DEX In 2021: Reviewing A Rollercoaster Year For Decentralized Exchanges
Despite the high rate of scams this year, it is still not the year with the highest amount lost to scams. That title still belongs to 2019 where investors lost almost $10 billion worth of cryptocurrencies to scams in a single year alone. Although, as the market is evolving, the scams have evolved to keep in line with the times.
Last month, Bitcoinist reported that YouTube crypto scams had seen investors lose almost $9 million. These scams which used the videos of influential figures to push their schemes are a sign that scammers are always changing tactics to entice new victims.
Crypto market continues downtrend | Source: Crypto Total Market Cap on TradingView.com
Featured image from Value of Stocks, chart from TradingView.com
