Crypto investors desire to earn more and they are ready to take higher risk. Sometimes risk is too high but investors wouldn’t even know about it until the rug pull happened. But what exactly is rug pull? It’s the situation when malicious individuals (crypto developers) run away with investors money. Yes, it’s possible and happened many time in last a few years. Here’s more details about rug pull and how to identify it before investing money into it.
Most of crypto investors are ready to take huge risk but when they became victims of rug pull they are assumed that didn’t spot it earlier. Most of the time it’s easy to identify the next big rug pull by using logic and thinking instead of buying into promises of enormous returns. The crypto industry having loose regulation with enormous number of loopholes. And it’s up to token / coin developers to exploit loopholes for own benefit.
As of January 1, 2022, more than 8000 cryptocurrencies exist in the world. Obviously not all out of 8000 crypto will be legitimate. According to Coinmarketcap, there are 297 meme tokens. And most of it useless.
According to Chainalysis, approximately $2.8 billion was the rug pull market in 2021. Rug pull scam accounted for 37% of all cryptocurrency scam revenue in 2021 (it was only 1% in 2020). Not all rug pulls start as DeFi project.
The rug pull scam based on wipping out an entire market cap worth of capital. It’s possible because the scam project designed in the most promising way. Scam project’s social media will be promising huge returns with “guarantee” of no rug pull. Their white paper will be packed with fake information on how that sh*t token will solve global problems. Their website will be available (after rug pull it disappears). A lot of hype will be created around this new and promising project. And hype will ensure liquidity flow into project. And that will make rug pull possibile.
Top 15 rug pulls by cryptocurrency value stollen:
Be aware that rug pull predominantly happen in the DeFi ecosystem (decentralised finance) and on DEXs (decentralised exchanges). It’s not hard to create own token and get it listed on DEXs (no audit and it’s free of cost). Newly created token could be purchased by exchange of popular coin to newly minted token. When developers consider that collected enough valuable coins, they withdraw everything from the liquidity pool and crush the token price to $0 in a few minutes. New tokens will grow in price too fast and provoke FOMO (fear of missing out).
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