Top Tips And Tricks to Identify and Avoid Rug Pull Scams

• The best way of avoiding rug pull scams is by identifying them.
• They can be identified by following simple steps.

What are rug pulls?

Rug pull scams are a type of scam in which the developers develop a cryptocurrency in which they have their stake is the largest. They take advantage of this stake by manipulating the Price of the cryptocurrency. These scams are very common in cryptocurrencies with small market caps since it is very easier to acquire a large stake in such cryptocurrencies.

Process of Rug Pulls

After gaining a good percentage in the crypto, the developers use various techniques to attract investors, whether by making unbelievable promises or by manipulating the price of the coin to show that the project is extremely successful.

All these techniques attract the attention of novice investors who do not know how to identify rug pull scams. Once they see potential in the project, they invest in such fake projects. The developers just wait for the right time then the investment in the project is maximum. 

Once they get sufficient investments to take out all the capital of the coin, what they do next is change the code of the project to ensure that no one sells their assets from the project. 

After this, they extract all the capital from the project. When such a large amount of money flows out of the project. What happens next is the Price, so the instrument is dropped suddenly, sometimes even to zero. 

Most of the rug pulls occur between 5 to 10 minutes, which means that investors have no time to react, and even if they identify the rug pull due to the changes in the smart contracts or the code of the project, they are not able to withdraw all of their assets from the project. This is how all they are left with is zero money. 

This whole process of the rug pull scams is really dangerous as well as very common in the crypto market; hence investors need to learn to identify such scams. Therefore, we have compiled for you top tips and tricks which you can use to identify such scams.

How to Identify Rug Pull Scams

• The skyrocketing price of the cryptocurrency

To attract investors, developers skyrocket the price of that crypto to create an illusion that the project is very successful. Once novice investors get trapped in their scam, they invest in the project, and the scammers take all the funds out of the project. 

If you notice that the Price of any crypto is rising very fastly, try to know the reason behind it. With due research, you will be able to know whether it is a legit project or whether developers are doing it to attract investors.

• Unknown founders

Although it is common in decentralized finance, developers do not reveal their identity. Even the developer of Bitcoin has not revealed his true identity. But if the developers of a potential rug pull project are unknown, it is like a confirmation that the project is just a rug pull scam.

• Large marketing expenditure

Developers of such projects spend a lot on the marketing and promotion of the project. If one finds any such things while analyzing the project’s white paper, then it might be a scam coin.