Different Types of Rug Pulls Scams and Ways to Avoid them

• Rug Pulls  Scams is basically of three types: Liquidity stealing, Limited sell order, and dumping.
• They can only be avoided  One can avoid such Scams by identifying them through using the techniques mentioned below.

What is a Rug Pulls Scams?

 Rug Pulls Scams are a trick to scam investors by creating hype for a project to attract investors. Scammers use various techniques like buying a large number lot of shares at once. to This results in a sudden increase in the price of the currency. By seeing this hype, many investors will try to earn profit by investing in the stock, thinking the stock will go up. 

Once the scammers receive a sufficient amount of money, they dump the coin or the cryptocurrency. This results in investors losing all of their money, and there is no way left for investors to recover their money. 

This thing is very common in the crypto market because there is no regulator present in the ecosystem that can save investors from such scams. So investors should be aware of the techniques to identify these scams and avoid them.

This name comes from the idiom “to pull the rug out,” which means to suddenly take away support from someone.

Crypto space is very highly prone to such scams. This can be verified by the fact that only in the first six weeks of 2023 11 Rug Pulls Scam happened, which resulted in the loss of approximately $14 million.

There are three types of Rug Pulls Scams:

• Liquidity Stealing:

It happens When the creators of the token withdraw all the money from the liquidity pool, it is called Liquidity Stealing. This action results in the dropping of the value of the token to zero and eventually results in huge losses to innocent investors.

• Limiting Sell order:

In this type of Rug Pulls Scams, the creators play with the code and design it in such a way that only they have the ability to sell them. After developing such types of cryptos now, the creators only wait for the retail investors to buy the token. Once the crypto sees a positive price action, they dump the coin and leave a worthless token. One of the most commonly known examples of such type of rup rug pull is the Squid Token Scam.

• Dumping:

This is another way of scamming people in which investors, the developer of the crypto, suddenly leave the coin worthless. Withdrawing all of their funds is very similar to Pump-and-Dump Scheme.

How to Avoid the Rug Pulls Scams in Crypto

The only way to avoid Rug Pulls Scams is by identifying them. Investors should do thorough research before investing in any entity in the crypto market.

We will explain to you the Let’s learn about the five signs of rug pull so that to help you identify you can identify them easily.

• Check the Developers

Checking Considering the credibility of the developers should be the first priority of the investors. Considering the facts such as; that what is their track record? Were they earlier involved in any of such malicious activities? or are they using fake social media accounts to fool investors?

If you find anything fishy in your research, hold prevent yourself from investing in such tokens.

• Auditing

Auditing is a very important factor in ascertaining considering the legitimacy of the cryptocurrency or any coin. Before investing in any crypto, go thoroughly through the whole audit report to ensure there is nothing malicious in their audit.

Another important thing to consider is to ensure that the auditing should have been has been done by a legitimate third party. Often scammers conduct fake audits to fool investors.

• Sudden price rise:

Whenever you see such a thing in a coin, there is a high chance that the developers may be doing this to attract investors. The first thing you need to do in such a case to check the legitimacy of the token is to check the no. of token holders. If the token holders are limited, there is a high chance that it is a scam coin. Try to stay away from such coins to avoid any losses.

• Abnormal Claims

This is Another popular characteristic of scam coin is that it claims things that are even impossible to happen. This is obviously done to attract investors. 

• Limit On Sell orders.

This is a hallmark of a scam coin. Creators often limit the no. of coins that the investors can sell by burring such codes in the code of the coin. To identify this, investors can buy the coin and immediately sell it. If you experience any problem in selling, like loading errors or anything. There is a high probability of it being a scam coin.