WHAT IS A RUG PULL AND HOW TO AVOID SUSPICIOUS PROJECTS?
A common sense in the stock shares of buying when the price is low and selling when it’s rising has drawn the attention of scammers in the world of cryptocurrencies. The so-called Rug Pull.
Specialists state that rug pulls happen every day. According to the report from Chainalysis, 40% of frauds involving cryptocurrencies in 2021 were because of rug pulls.
The pull happens when a cryptocurrency developer, for example, buys a considerable share of its own digital coin, making it rise more than 1000%. Then, after gaining the interest of investors, it sells around 90%, knocking the token’s value down.
Rudá Pellini, the co-founder of Wise&Trust, stated that this scam became a regular thing with ICOs and more recently started to gain more power with NFT projects and Defi.
One of the latest scams that mobilized investors worldwide was the squidCoin, inspired by the TV show Squid Game. As a result, some tens of millions of dollars were lost by investors.
Lucas Passarini, a bitcoin market trader, stated that “Rug pulls tend to happen with digital coins that have a name on it that it’s trending, like a tv show.” The South Korean production from Netflix was the first to hit 100 million spectators in its first month on air.
Specialists have prepared some tips to prevent investors from falling into rug pulls:
– Check if the project is doxxed
– Check the white paper (a public document that has the information regarding the assignment of a token)
– Search for discord and telegram communities of the project
– Check if the cryptos have fake or similar websites with known projects
– Check if there’s an excessive marketing happening
– Check if one wallet is the owner of around 90% of the asset
Ray Nasser, the creator of OR Blockchain investments, says, “It’s expected that when a project reaches 0, there will always be theories that it was either a fraud or scam. That’s mainly caused 99% of people that invest in those activities don’t know or don’t want to take the time to study. The nature of the human being is to earn money quickly and quick.”
