Investing in meme coins can sometimes be risky. Due to lack of research, many investors get to experience rug pulls. When you get the rug pulled, your investment disappears in the blink of an eye. Let's spot potential rug pulls and a guide on how to protect yourself from them.
Spotting Rug pulls
You can spot rug pulls when your funds disappear in a matter of seconds. mostly happens when the deployer of the token is not renounced and the contract is mutable. Sometimes the price of meme coins seems high, but there is no liquidity, which means there is no room for trade in that coin (you can't buy nor sell).
There are some other ways to find potential rug pulls. Some developers allow the option to mint more tokens; because of that, the supply of the token may increase and the price of that particular coin may decrease.
Moreover, developers can modify the buy-sell tax percentage of the token. If they increase the sell tax, you will not be able to sell your token, and you will be trapped in that trade.
How do you protect yourself from Rug pulls?
There are websites like rugcheck.xyz, birdeye.so, or dextools.io that allow users to paste the token address and check the audits of the coins, including minting authority, low liquidity, or high token holding.
Secondly, check the top holders of a particular meme coin. If a small number of addresses holds a large amount of tokens, consider not investing in that coin.
Moreover, verify if the ownership of the token is renounced, which means that the developer of the token cannot modify the token and has no control over the contract.
Check the activity of the community of a meme coin on social media platforms like Twitter, Telegram, or have a website. Verify if the community is organic and engaging.
