The term “rug pull” pertains to the unwanted event which cryptocurrency investors avoid as much as possible. It is a synonym for “exit scam,” which scammers in the cryptocurrency space commit.
We are quite eager to share this informative article with our readers, especially those who are new to cryptocurrency investing. We believe it can aid them in staying guided and preventing themselves from getting defrauded in their virtual currency investing journey.
Based on the educational article posted online by The Currency Analytics, which is a virtual currency news website offering real-time and breaking news about cryptocurrencies, rug pull incidences are common in the decentralized finance ecosystem, specifically on decentralized exchanges or DEX.
This undesirable scenario is when shady cryptocurrency developers abandon a project and run away with their investors’ investment funds. Some past examples of exit scams are Whale Farm, Thodex, Meerkat Finance, and Compounder Finance.
The following three situations are the primary indicators that a rug pull is highly possible to happen, making an investor a victim of scammers:
- The creator of the cryptocurrency project is unknown.
Cryptocurrency investors should be careful when investing in virtual assets whose developers do not allow themselves to be identified. This suspicious scenario should make investors wary already.
- The crypto-token’s trading price is surging rapidly for no reason.
Developers of legitimate cryptocurrencies are usually transparent to their investors. They enable the media to inform their investors about what makes their project’s trading price increase.
On the other hand, questionable cryptocurrency developers exhibit their intent to perform a rug pull when they keep their investors in the dark. They manipulate their virtual currency project’s trading price by making it rise, yet they do not let their investors know the truth behind this event.
- The yields for a specific cryptocurrency project are too high.
Crypto-asset investors are typically after high returns. If they are novices, they may get enticed with a project when they see that it can provide them with high yields.
Nevertheless, instances of rug pulls are just around the corner if investors find these returns quite substantial, but the developers do not provide a concrete explanation for this happening. Hence, this situation should already make investors doubtful that an exit scam will soon take place.
Cryptocurrency investors interested in decentralized finance or DeFi are advised to be cautious. After all, DeFi protocols do not feature an oversight.
This setup makes rug pulls highly possible. Additionally, exit scams are likely with meme coins. Many cryptocurrency investors are attracted to invest in these virtual assets.
They get pulled through a maze of fear of missing out or FOMO. With record numbers of crimes in the cryptocurrency space documented lately, we want to warn investors to keep themselves well-informed regarding virtual currency investment.
We also recommend them to be vigilant always against exit scams. We want them to stay protected and well-informed against serious and damaging rug pulls, in which malicious cryptocurrency scammers deliberately flee with the high-value crypto-asset and their investors’ hard-earned investment money.