Skimlinks
Crypto rug pull
Photos by Pixabay.com.

Don’t get fooled! Avoid crypto rug pull with this comprehensive guide

The crypto space is rife with opportunities, but it’s also riddled with risks, one of the most prevalent being rug pulls. To start, we would first have to define what a crypto rug pull is.

A rug pull is a fraudulent scheme in the crypto space where project developers intentionally abandon a project after attracting investor funds. They essentially “pull the rug out from under” unsuspecting investors, leaving them with worthless tokens and disappearing with their money.

Binance
Binance – The World’s Leading Cryptocurrency Exchange.
Cryptocurrency Exchange for Bitcoin, Ethereum & Altcoins Binance cryptocurrency exchange – We operate the worlds biggest bitcoin exchange and altcoin crypto exchange in the world by volume

How a crypto rug pull works

  1. Hype and promotion: Rug pullers often create significant hype around their project, promising high returns and innovative features. They use social media, influencers, and paid promotions to attract investors.
  2. Token creation: They create a new cryptocurrency token and list it on decentralised exchanges, where there are fewer barriers to entry and less scrutiny.
  3. Liquidity manipulation: To create the illusion of market demand, they may artificially inflate the token price through coordinated buying and selling activity.
  4. Exit scam: Once they accumulate enough investor funds, they abruptly abandon the project, disable trading, and disappear with the stolen money.

Types of rug pulls

  • Hard rug pull: This involves pre-planning and manipulating the code to ensure the developers can steal funds without any possibility of recovery.
  • Soft rug pull: This involves abandoning the project without code manipulation, relying solely on hype and misleading information to attract investors.

Examples of rug pulls

  • Squid Game (SQUID): In late 2021, this project inspired by the popular Netflix series rapidly gained popularity. However, its developers abandoned it shortly after its launch, taking millions of dollars from investors.
  • Titan (TITAN): This decentralised finance (DeFi) protocol promised high returns but collapsed abruptly in June 2021, leading to $2 billion in losses for investors.
  • $CAMO: In 2022, this project’s developers locked liquidity for only a week before unlocking it and draining the funds, leaving investors with worthless tokens.
Binance - Cryptocurrency Exchange for Bitcoin, Ethereum & Altcoins

To protect your hard-earned money, here are 10 tips to help you avoid falling victim to these scams:

10 Tips to help you avoid falling victim to a crypto rug pull

1. Do your own research (DYOR)

Never blindly invest in any crypto project. Take the time to understand its technology, team, whitepaper, roadmap, and community sentiment. Research the founders’ backgrounds and look for red flags like a lack of experience, anonymity, or unrealistic promises.

  • Research the project’s technology: Understand what problem it solves and how it works. Read the whitepaper and other technical documentation to assess its feasibility and potential.
  • Research the team: Investigate the team’s background and experience. Are they qualified and reputable? Have they been involved in successful projects previously?
  • Research the whitepaper: The whitepaper should clearly outline the project’s goals, roadmap, and tokenomics. Look for any inconsistencies or red flags, such as unrealistic promises or vague descriptions.
  • Research the roadmap: Does the roadmap provide realistic milestones and timelines? Is the team transparent about their progress?
  • Research the community sentiment: Join the project’s online communities and forums. Analyse the overall sentiment and identify any concerns or red flags raised by other members.

Crypto.com Metal Visa Cards

Available Card Tiers: Obsidian, Frosted Rose Gold, Icy White, Royal Indigo, Jade Green, Ruby Steel and Midnight Blue.

5% Cash back

2. Use trusted exchanges

Stick to reputable exchanges with a proven track record of security and user protection. Avoid decentralised exchanges (DEXs) unless you’re confident in your ability to assess their legitimacy.

  • Choose exchanges with a long track record of security and user protection. Look for exchanges that are regulated and have undergone independent audits.
  • Avoid newly launched or obscure exchanges, as they may be more susceptible to security breaches or scams.
  • Be wary of exchanges that offer exceptionally high trading volumes or liquidity, as this could be a sign of manipulation.
Binance

3. Look for liquidity lock

Rug pullers typically lock liquidity for a short period or not at all. Look for projects with locked liquidity for a substantial period, preferably a year or more. This indicates the team’s commitment and reduces the risk of them abandoning the project with investors’ funds.

  • When developers lock a portion of the project’s liquidity for a specified period, it demonstrates their commitment and reduces the risk of them absconding with investor funds.
  • Investigate the locking mechanism and ensure it is secure and verifiable. Be wary of projects that lock liquidity for a short period or use centralised solutions that can be manipulated.

4. Analyse tokenomics

Scrutinise the project’s tokenomics, including the token allocation, distribution, and burn schedule. Be wary of projects with a high concentration of tokens held by the team or advisers, as this increases the risk of manipulation.

  • Understand how the tokens are distributed and allocated. Be wary of projects with a large percentage of tokens held by the team or advisors, as this can lead to price manipulation and dumping.
  • Look for projects with a clear burn schedule for tokens, as this can help reduce inflation and increase the value of remaining tokens.
  • Analyse the token’s utility within the project’s ecosystem. Does it have a clear purpose and value proposition?
337251925 744924170403661 3369694012981927507 n 1

Crypto.com Visa Card: The only crypto card you need

Get up to 5% back on spending paid in crypto. No monthly, annual, or ATM withdrawal fees.

5. Beware of hype

Be cautious of heavily hyped projects promising exorbitant returns. Genuine projects rarely rely on excessive promotion. Favour projects with a focus on organic growth and building a strong community.

  • Be cautious of projects heavily promoted by celebrities or influencers. Often, these projects are pump-and-dump schemes designed to attract unsuspecting investors.
  • Do not blindly follow recommendations on social media or online forums. Always conduct your own research before investing.
  • Focus on projects with a strong focus on building a solid product and community, rather than those relying solely on hype.

6. Stay away from pump-and-dump schemes

These schemes artificially inflate the price of a token through coordinated buying and selling, ultimately dumping the price and leaving investors holding the bag. Avoid projects with sudden price spikes followed by steep declines.

  • These schemes often involve coordinated buying and selling activity to artificially inflate the price of a token. Once the price reaches a peak, the organisers dump their tokens, causing the price to plummet and leaving investors with significant losses.
  • Be wary of projects with sudden and unexplained price spikes followed by sharp declines.
  • Avoid projects with a small number of large holders, as this can indicate potential manipulation.
eToro share img

Crypto, Stocks & Beyond! The power of social investing

Trade and invest in a diversified portfolio, starting at $10, or practice risk-free with a virtual portfolio.

Get investment ideas from 30M users and invest in 3,000+ assets on a trusted and friendly platform.

7. Use rug pull detection tools

Several tools scan for rug pull indicators, including liquidity unlocks, large token transfers, and suspicious wallet activity. Consider utilising these tools for additional protection.

  • Several tools analyse blockchain data and identify potential rug pull indicators, such as liquidity unlocking events, large token transfers, and suspicious wallet activity.
  • Consider utilising these tools as an additional layer of protection, but remember that they are not foolproof and should not be your sole basis for investment decisions.
  • Popular rug pull detection tools include RugDoc, SCAMEX, and TokenSniffer.

8. Invest in stages

Don’t invest your entire allocation at once. Invest in stages to monitor the project’s progress and mitigate potential losses.

  • Instead of investing your entire allocation at once, consider investing in stages over time. This allows you to monitor the project’s progress and mitigate potential losses.
  • Start with a small investment and increase your stake if the project demonstrates positive development and meets your expectations.
Crypto Credit Card | Gemini

9. Diversify your portfolio

Don’t put all your eggs in one basket. Spread your investments across different projects and asset classes to reduce the impact of potential rug pulls.

  • Spread your investments across different projects and asset classes to mitigate risk. This way, you are not overly exposed to any single project, including the risk of a rug pull.
  • Consider investing in a variety of cryptocurrencies, DeFi protocols, NFTs, and other assets to achieve a balanced and diversified portfolio.

10. Stay informed

Keep yourself updated with the latest news and developments in the crypto space. Follow credible sources and communities to stay ahead of potential scams.

  • Keep yourself updated with the latest news and developments in the crypto space. Follow credible sources and communities to learn about new projects, potential scams, and regulatory changes.
  • Subscribe to newsletters, attend online conferences, and participate in discussions with other crypto enthusiasts to stay at the forefront of the market.

A whole investment firm of one.

Investing doesn’t have to be that hard.

Access stocks, ETFs, and more. Oh, and no commission fees. That’s right. Zero. Nada. Zilch. Your first stock is even on us.

*Conditions apply

Bonus tip

Utilise two-factor authentication (2FA) on all your crypto accounts and wallets to enhance security.

By following these tips and remaining vigilant, you can significantly reduce your risk of falling victim to a crypto rug pull and protect your hard-earned money. Remember, due diligence and a healthy dose of scepticism are your best weapons against scammers in the ever-evolving crypto landscape.

_________________________________

Playstation 5 Pro

Every month in 2024 we will be giving away one PlayStation 5 Pro. To qualify join our Facebook group, TikTok and Subscribe to our Sweet TnT Magazine YouTube channel

When you buy something through our retail links, we may earn commission and the retailer may receive certain auditable data for accounting purposes.

You may also like:

Crypto investing for retirement: Is it a viable option?

Top crypto research tools you should have

Crypto exchange hacks and how to protect your assets

How to protect one’s crypto from Phishing

The cybersecurity risks of cryptocurrency

Payment methods of Caribbean consumers: Mastercard reveals preferences

Mastering your money: Proven strategies for financial success

McAlvany Popup Silver is Here

About Sweet TnT

Our global audience visits sweettntmagazine.com daily for the positive content about almost any topic. We at Culturama Publishing Company publish useful and entertaining articles, photos and videos in the categories Lifestyle, Places, Food, Health, Education, Tech, Finance, Local Writings and Books. Our content comes from writers in-house and readers all over the world who share experiences, recipes, tips and tricks on home remedies for health, tech, finance and education. We feature new talent and businesses in Trinidad and Tobago in all areas including food, photography, videography, music, art, literature and crafts. Submissions and press releases are welcomed. Send to contact@sweettntmagazine.com. Contact us about marketing Send us an email at contact@sweettntmagazine.com to discuss marketing and advertising needs with Sweet TnT Magazine. Request our media kit to choose the package that suits you.

Check Also

Your guide to earning US dollars from Trinidad and Tobago: 10 ideas.

10 Legal ways to earn US dollars from Trinidad and Tobago

In an increasingly globalised economy, many individuals in Trinidad and Tobago are seeking opportunities to …

Singapore's innovation in finance: A decade-by-decade journey.

Singapore’s innovation in finance: A journey through time

Singapore, often regarded as the financial hub of Southeast Asia, has consistently been at the …

Leave a Reply

Discover more from Sweet TnT Magazine

Subscribe now to keep reading and get access to the full archive.

Continue reading