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rugpulls: How to identify and avoid them
The world of cryptocurrency recorded a fair participation in fraud and manipulations, known as Rugpulls. These are malicious programs aimed at stealing investors’ money, often to manipulate the market and use of nothing unsusculating investors. In this article, we will delve into what Rugpulls are, how they work, and most importantly, how can you identify and avoid them.
What is rugpull?
Rugpull is an investment fraud that includes the creation of a false cryptocurrency or token project with false promises of high returns and unparalleled value. These fraud is often masked as justified cryptocurrencies, but in fact the project has no purpose than theft of investors’ money. The term “rugpull” was created from the expression “carpet”, which refers to the act of manipulating the carpet by pulling it to reveal that it is worthless.
How do rugpulls work?
Rugpulls usually follow a similar pattern:
- The initial offers of coins (ICO):
The fraud creates a false ICO campaign, promising extremely high phrases or guaranteed wealth. The fraudster often uses social media and internet communities to promote the project.
- Sales of tokens: The cheater occupies the sale of tokens, in which investors are encouraged to buy at an artificially low price. This is to create a false sense of security among potential investors.
- Rapid price increase: After the end of ICO sales or token, prices increased rapidly, often due to noise and speculation, not actual value.
- Meanwhile, investors have worthless assets.
how to identify rugpull
To avoid incidence of Rugpull’s victim, here are some warning signs that should be noted:
- Unrealistic promises: Be careful in projects promising extremely high phrases or guaranteed wealth.
- Lack of transparency: If the design team is secret as to their development plans or tokenomics, it is probably a scam.
- No clear value: Good cryptocurrency should have a clear value and case of use. Rugpulls often do not have transparency and focus on manipulation rather than investment.
4.
- Red flags in social media: Watch out for social media campaigns promoting ICO or sale of tokens. Look for suspicious designs such as a rapid price increase and then a sudden decline.
how to protect yourself
To protect yourself against rugpulls:
- Research, research, research: Carefully examine each cryptocurrency or project before investing.
2.
- Dize your portfolio: Spread your investments into many projects to minimize the risk.
- Be careful: Watch out for too promotional campaigns, especially those that promise extremely high returns.
5.
Application
Rugpulls pose a serious threat to investors in the space of cryptocurrencies. Being aware of these warning signs and by taking steps to protect yourself, you can minimize the risk and avoid the incidence of the victims of these fraud. Remember that if it seems too good (or bad) to be true, it is probably so. Always prioritize caution and diligence while investing in cryptocurrencies.
Additional resources:
- Coinmarketcap: Comprehensive tracking of the cryptocurrency market
- Sec.
