Imagine you come across a funny meme coin with a catchy name and its price is skyrocketing. You think of early Dogecoin investors and big opportunities. You decide to invest excitedly, expecting to be part of the next big thing. But suddenly, just as quickly as the price went up, it drops to zero. Your investment is gone in seconds. This, my friend, is the dreaded âRug Pulls.â
Rug pulls are a bitter reality in the exciting, but sometimes dangerous, world of cryptocurrencies. Malicious project creators lure investors in with promises of incredible profits, only to pull the rug out from under them, leaving them with nothing but empty wallets and a bitter taste in their mouths.
Understanding Rug Pulls and Their Close Companions
1. Creation and Propaganda: Scammers launch a new token, often heavily promoted online; lots of social media followers, influencers endorsing the token, and a very poor website or none at all.
2. Initial investment: They may invest their own money to create a false sense of security and legitimacy. They may even have a token economy and a roadmap.
3. Price manipulation: Through marketing and limited initial supply, the price is artificially inflated. You have the opportunity to invest in the presale, and also through any decentralized exchange where they add liquidity.
4. Withdrawal: Once enough investment is made, the scammers withdraw everything, causing the price to collapse.
Danger signs
1. Anonymous Teams: Be wary of projects whose members you don't know.
2. No unusual tokens or no tokens at all: Watch for large chunks of tokens held by a few wallets.
3. Lack of auditing: Smart contracts for legitimate projects are often audited.
4. Overhype: Be careful if the project relies heavily on marketing rather than substance, this is key.
5. Promise of Quick Profits: Promising high returns in a short time is a classic sign of a scam.
Community atmosphere
A strong and active community is the backbone of any successful meme coin. It builds trust and ensures continued interest and engagement, which is crucial to the coinâs long-term success.
1. How to Evaluate Community Participation
Join the coinâs Telegram or Discord groups to gauge the community atmosphere. Look for active discussions, positive interactions, and developer presence. A welcoming and vibrant community indicates a supportive environment and a higher likelihood of success for the coin.
2. Networking and Real Sharing
Active social networks, especially Telegram and Twitter (X), with real engagement and not bots, are essential. A well-designed website is also a positive addition and builds trust.
Other key factors
There are other key factors in assessing whether a rug pull is in progress that I will outline for you:
Liquidity is locked and the mint is disabled.
It is necessary to secure liquidity and disable the mint authority. Sometimes, it is necessary to do some research to verify the mint authority.
Review Titles
Make sure that no one person owns a large amount of coins, or that several people collectively own a large amount of them, as this could lead to an organized mass sale.
Address counter and transaction patterns
Make sure you have a real, diverse number of wallets making purchases. Sometimes you'll see good volume but only one or two wallets exchanging coins with each other.
Uses verification tools
Use tools like rugcheck.xyz that can tell you some of these factors and also determine if it is a "Honey Pot" (you can buy the coin but you can't sell it).
Solutions and Best Practices
Here's what you should take away from all this:
* Check for mintage and ownership revocation: Use tools like BirdEye to check for mintage revocation and ownership of the contract.
* Liquidity is locked: Use DexScreener to check if liquidity is locked.
* Carrier Distribution: Use the photon to ensure that the large carriers have less than 15% of the total width.
* Carrier Distribution: Use the photon to ensure that the large carriers have less than 15% of the total width.
* Monitor the creator's wallet: In SolScan, check the creator's wallet to make sure he doesn't have a large supply spread across many small wallets to hide his large holdings.
Set realistic profit goals and stick to them. Instead of aiming for 100x return, consider more achievable goals like 2x or 3x. Use stop loss orders to protect your capital and take additional profits to lock in your profits.
conclusion
I think trading memecoins is very exciting and fun. But like all volatile assets, it carries risks.
I think we are all aware of the scam in this memecoins world and live with it to some extent. But obviously our goal is to avoid it at all costs.
Sure, we have convinced ourselves more than once about the memecoin that we loved so much and trusted blindly, but it ended up being another scam and we lost our faith in humanity again. But donât worry, apply this guide and you will be fine.
