Saved in:
| Main Authors: | , , |
|---|---|
| Format: | Preprint |
| Published: |
2025
|
| Subjects: | |
| Online Access: | https://arxiv.org/abs/2502.10512 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1866910024075313152 |
|---|---|
| author | Naviglio, Manuel Tarantelli, Francesco Lillo, Fabrizio |
| author_facet | Naviglio, Manuel Tarantelli, Francesco Lillo, Fabrizio |
| contents | Blockchain technology has revolutionized financial markets by enabling decentralized exchanges (DEXs) that operate without intermediaries. Uniswap V2, a leading DEX, facilitates the rapid creation and trading of new tokens, which offer high return potential but exposing investors to significant risks. In this work, we analyze the financial impact of newly created tokens, assessing their market dynamics, profitability and liquidity manipulations. Our findings reveal that a significant portion of market liquidity is trapped in honeypots, reducing market efficiency and misleading investors. Applying a simple buy-and-hold strategy, we are able to uncover some major risks associated with investing in newly created tokens, including the widespread presence of rug pulls and sandwich attacks. We extract the optimal sandwich amount, revealing that their proliferation in new tokens stems from higher profitability in low-liquidity pools. Furthermore, we analyze the fundamental differences between token price evolution in swap time and physical time. Using clustering techniques, we highlight these differences and identify typical patterns of honeypot and sellable tokens. Our study provides insights into the risks and financial dynamics of decentralized markets and their challenges for investors. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2502_10512 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Price manipulation schemes of new crypto-tokens in decentralized exchanges Naviglio, Manuel Tarantelli, Francesco Lillo, Fabrizio Computational Finance Cryptography and Security Blockchain technology has revolutionized financial markets by enabling decentralized exchanges (DEXs) that operate without intermediaries. Uniswap V2, a leading DEX, facilitates the rapid creation and trading of new tokens, which offer high return potential but exposing investors to significant risks. In this work, we analyze the financial impact of newly created tokens, assessing their market dynamics, profitability and liquidity manipulations. Our findings reveal that a significant portion of market liquidity is trapped in honeypots, reducing market efficiency and misleading investors. Applying a simple buy-and-hold strategy, we are able to uncover some major risks associated with investing in newly created tokens, including the widespread presence of rug pulls and sandwich attacks. We extract the optimal sandwich amount, revealing that their proliferation in new tokens stems from higher profitability in low-liquidity pools. Furthermore, we analyze the fundamental differences between token price evolution in swap time and physical time. Using clustering techniques, we highlight these differences and identify typical patterns of honeypot and sellable tokens. Our study provides insights into the risks and financial dynamics of decentralized markets and their challenges for investors. |
| title | Price manipulation schemes of new crypto-tokens in decentralized exchanges |
| topic | Computational Finance Cryptography and Security |
| url | https://arxiv.org/abs/2502.10512 |