A crypto rug pull occurs when developers of a cryptocurrency, often a meme coin, suddenly withdraw all liquidity, leaving investors with worthless tokens. This can result in 99% or even 100% of an investorâs funds disappearing in seconds. Here's how to spot rug pulls before investing in any cryptocurrency:
Key Signs of a Rug Pull:
1. Investment Disappears Instantly: If you see your investment vanish right after purchasing a meme coin, itâs a clear sign of a rug pull. You thought you were making a profit, but instead, you've become a victim of fraud.
2. Lack of Liquidity: As prices rise, you try to sell but find no buyers, leaving you unable to cash out. This happens because the coin lacks liquidity, meaning there isnât enough money in the market to support transactions.
How to Identify Rug Pull Traps:
1. High Token Holdings: If the coinâs creator or team holds a large portion of the tokens, they can dump their coins on the market for a profit, leading to panic selling and a collapse in value.
2. Mintable Tokens: Some developers enable the ability to mint unlimited tokens in the future. As more tokens are created, the value of your investment diminishes.
3. Tax Manipulation on Trades: If you spend $100 on a token but only receive $20 worth, the tokenâs creator might be manipulating the buy/sell tax, reducing your investmentâs value.
