Crypto Scams Are Always There. Avoid Getting Rug-pulled With These Tips
December 03 2021 - 12:35AM
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Cryptocurrency has captured the world’s attention after the
pandemic, and notorious scammers have taken notice too. With the
rising popularity of altcoins and meme tokens, there will be an
upsurge of new crypto scams taking place on Telegram. What is a
Scam? Scam, rug pull, you name it. They’re everywhere: Telegram
chats, groups, fake communities. But what exactly is a rug pull?
The next level. They happen when developers create a token paired
with a valuable cryptocurrency, list the token on decentralized
exchanges (DEXs), and then pull out all the funds. In simple words,
a crypto rug pull occurs when the developers abandon a project
after cashing out investors’ capital. Consider the recent “Squid
Game” scam where the developers created a ‘Play-to-earn’ SQUID
token, drew in buyers, inflated the prices and made off with $3.38
million, according to Gizmodo. How to spot a Rug Pull? Though
seasoned scammers create the Rug pulls, it is easy to spot them if
the investor pays close attention to the following signs. Low
Liquidity Low liquidity means it is difficult to convert the tokens
to cash as the developer had limited funds to create the token. It
is easier for the developer to manipulate the token’s price when
the liquidity is lower. The best way to check liquidity is by
looking at 24hr trading volume, which should be at least 20% to 40%
of the coin’s total market cap. Low TVL(Total Value Locked) TVL
refers to the total amount invested in a particular project and is
a reliable metric to check the project’s authenticity. A legitimate
project will have a few billion invested, whereas a scam project
might have a few hundred dollars. How to avoid a Rug Pull? Here are
some tips to avoid Rug pulls and exit scams Read the Documentation
Every project should typically have a whitepaper, which provides
investors with information like the concept, purpose and technology
behind the project. A well-drafted whitepaper provides legitimacy
and a professional outlook to the project. A poorly written or
copied whitepaper is repulsive and considered a red flag. Follow
Social Media Channels A scam token might usually have an essential,
low-traffic website and social media channels that were created
recently. At the same time, the most successful projects will have
an active presence, investor outreach and community engagement.
There will be active updates on platforms like Twitter, Telegram
and Discord channels. For Instance, CrypTalk is an encrypted
messenger that verifies projects legitimacy and keeps investors in
a safe place with access to KYC, charts, audits, reports, market
cap, and bring exposure to valuable projects. Using Tools There are
online tools that can detect a rug pull, like Token Sniffer and
RugDoc. For a high level of scam detection, Etherscan or Binance
Smart Chain explorer can help users evaluate the project’s
legitimacy. However, navigating through different apps is
time-consuming and information is always limited. Closing Thoughts
With the Crypto industry growing bigger and garnering a lot of
attention, rug pulls have become prevalent in DeFi and, to some
extent, in NFTs. Most of these scams are well planned, marketed
intensively and executed brilliantly. By following the tips,
conducting due diligence and conceptual research analysis on
prospective projects, you can decrease the chances of being Rug
pulled. Be an intelligent investor, not a greedy one!
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