What is a rug pull? Understanding Risks in Cryptocurrency

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The crypto market has merely mushroomed and is hot; many investors and enthusiasts worldwide are eyeing it. In fact, the greater the profit, the higher the risk: rug pulls. In this post, we expose just what a rug pull is, how it works, and what to look out for to avoid falling into the trap.

What is a Rug Pull?

Rug pull is the type of cryptocurrency scam in which people who create or manufacture such a project disappear with invested sums. This usually happens when a new cryptocurrency or token is launched and hype for the same is built over social media, online forums, and influencer marketing.

A rug pull works like this:

Here is the structure of a basic rug pull in detail
1. New Project: developers launch a new cryptocurrency or token, usually with extremely promising features and benefits.
2. Viral Creation: It will make the message viral on social media, forums, and influencers.
3. Investment: Investors invest in the project, thus increasing the cost of the token.
4. Token Liquidity: Developers list the token on cryptocurrency exchanges, hence creating liquidity.
5. Rug Pull: Developers vanish overnight with the project and liquidate their tokens and take off with investor money.