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Rachel Welch

08 November 2022 74 Read Crypto

What Are Crypto Rug Pulls?

Crypto rug pulls cover a variety of problems in the cryptosphere, including newly founded crypto tokens whose founders pull out before they can even build the project, as well as exit scams from established projects. They can also include Ponzi schemes, honeypots, and impersonation of other coins.

Stealing liquidity

Cryptocurrency rug pulls are a common scam, and they have been responsible for more than $3 billion in stolen funds. These scams involve fraudulent developers creating a new crypto token and promoting it heavily. As the coin price declines, these developers dump the coins and disappear with the liquidity pool. A typical example of a crypto rug pull is Squid Game Token, which saw tremendous growth early on, before eventually disappearing from the market.

To avoid becoming a victim of a crypto rug pull, first determine how long the coin has been in existence. New cryptocurrencies are flight risks, as they do not have a proven long-term value. Additionally, you don't know what the creators' intentions are. Secondly, keep an eye out for sudden price spikes.

Limiting sell scams