Imagine you’ve just invested in a meme coin, but suddenly, all your money is gone. This is a clear sign of a rug pull, where 99% or even 100% of your investment disappears in seconds.
In this post, I’ll explain how to spot rug pulls before investing in cryptocurrency.
Major Signs of Rug Pulls
Investment Disappears Instantly
You’re watching your meme coin investment, hoping for big profits, but suddenly all your money vanishes. This is what happens during a rug pull – you’ve been scammed.
Lack of Liquidity
The price of your meme coin is rising, but when you try to sell, no one is buying, and your funds lose value. This is due to a lack of liquidity, meaning there’s no market for your coin.
How to Spot Rug Pull Traps
Large Token Holdings by Creators
If the creator or team holds a large number of coins, they can sell their holdings for profit, causing panic selling, which reduces the value of your investment.
Mintable Tokens
Some token creators allow themselves to mint unlimited coins in the future. As more tokens are created, the value of your investment drops.
Tax Manipulation
You spend $100 to buy a token, but only receive tokens worth $20 or less. This happens when the creator changes the tax rates on transactions, causing your funds to disappear.
How to Avoid Rug Pulls
Always check liquidity, the smart contract, and the total supply of the tokens. Tools like RugCheck or Bireye can help with this.
Look at how many wallets hold the coin. If a few wallets hold most of the coins, it’s a red flag.
Check if the coin has an active presence on social media platforms like Twitter, Instagram, or YouTube. If the community is inactive, it’s best to avoid it.
