“It is going to make a millionaire overnight,” they tell you. And when you invest some money in it, you see its price starts to decline rapidly. That is exactly like the rug being pulled from underneath you. The rug-pull scam happens rather frequently in the crypto market. But there are some telltales and signs that can help you identify them, even if you are not an expert in analyzing smart contracts. Have you ever been scammed like this?
Do you remember the Squid Game Token?
It went from $2486 to a penny in a short period.
Its anonymous founders made off about $3.3 million of this sudden soar and plunge.
This particular scam is called “Rug-Pull”.
A rug-pull scam exploits the bugs and backdoors of smart contracts.
Investors lost $2.8 billion to this fraud in 2021, more than a third of cryptocurrency scam revenue.
If you don’t have the technical understanding to fully audit a project, at least watch out for these red flags.
#1 Extreme Hype
Don’t follow every dreamy pitch you read or hear about a token project.
#2 Low Liquidity
Small projects are more easily manipulated than big ones.
#3 Unvetted actor
Although the project founders are anonymous, you should research their track record.
And finally remember this: “If it’s too good to be true, then it probably isn’t good at all”.