Rugpulls: how to identify and avoid them
The world of cryptocurrency experienced its just part of scams and manipulations, known as Rugpulls. These are malicious diets designed to steal money from investors, often in order to handle the market and exploit without distrust investors. In this article, we will immerse ourselves on what rugpulls are, how they work, and above all, how you can identify and avoid them.
What is a Rugpull?
A rugpull is an investment scam that involves creating a false cryptocurrency project or a token with false promises of high yields and unequaled value. These scams often emerge from legitimate cryptocurrencies, but in reality, the project has no real purpose other than stealing money from investors. The term “Rugpull” is from the “Taping” sentence, which refers to the act of manipulating a carpet by pulling it up to reveal that it is worthless.
How do rugpulls work?
Rugpulls generally follow a similar model:
- Initial offers of parts (ICO): A crook creates a false ICO campaign, promising unusual yields or guaranteed wealth. The crook often uses social media and online communities to promote the project.
- Salves of tokens: The crook organizes a sale of tokens, where investors are encouraged to buy at an artificially low price. This is designed to create a false feeling of security among potential investors.
- Rapid increase in prices: Once the iCo or token sale in progress, prices soar, often due to media and speculation rather than real value.
- Strategy to leave the crook: While prices start to lower, the crook suddenly ceases the project or announces that it is disconnected. Meanwhile, investors are found with worthless assets.
How to identify a rugpull
To avoid being a victim of a rugpull, here are some warning panels to be monitored:
- Unrealistic promises: Be careful of projects promising unusually high yields or guaranteed wealth.
- Lack of transparency: If the project team is secret on its development plans or its tokenomics, it is probably a scam.
- No clear value: A good cryptocurrency should have a clear value and a use case. Rugpulls often lack transparency and focus on manipulation rather than investment.
- Sales of non-registered tokens: Make sure that the sale of tokens is registered with the competent authorities, such as the Securities and Exchange Commission (SEC).
- Red flags in social media:
Beware of social media campaigns to promote ICO or tokens sales. Look for suspicious models, such as rapid price increases followed by a sudden drop.
How to protect yourself
To protect you from rugpulls:
- Research, research, research: Look deeply cryptocurrency or project before investing.
- Check the recorded tokens: Make sure that the sale of tokens is registered with the competent authorities and has a clear value.
- Diversify your portfolio: Repair your investments on several projects to minimize risks.
- Be careful of the media threshing:
Beware of too promotional campaigns, especially those that promise unusual yields.
- Stay informed: Stay up to date with the market news and regulatory changes to avoid being caught off guard.
Conclusion
Rugpulls are a serious threat to investors in cryptocurrency space. By being aware of these warning panels and taking measures to protect yourself, you can minimize your risks and avoid falling victim of these scams. Remember that if it seems too good (or bad) to be true, this is probably the case. Always prioritize prudence and diligence when investing in cryptocurrencies.
Additional resources:
- Coinmarketcap: a complete tracker of the cryptocurrency market
- Dry.
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