Rug Pull: What are they and how to avoid them?

The expression "Rug Pull" refers to the idea of abruptly removing the carpet/support on which a person is resting, for example. And, that, in one go! In the context of cryptocurrency and especially in the context of DeFi, it is the act of manipulating the price of a cryptocurrency. to ultimately suddenly withdraw the liquidity pool for example. The Rug Pull can also result in developers suddenly selling all their tokens on a massive scale.

So, when the pool on the exchange is emptied, well, investors try by all means to resell their tokens but it is already too late, there is no longer any liquidity, and they end up with tokens emptied of their substances... It's okay, the token is no longer worth anything... What a shame.

In fact, this is the fatal blow that a malicious "entrepreneur" makes who would have created a token only for the intended purpose of pull with the crate, timely.

So when is the right time?

The moment when you least expect it, of course!

What are rug pulls in DeFi?

This is when there is a craze for the token, this is when investors start locking up tokens in the hope of generating gains. And, there, bam! Rug Pull! The developer leaves with the cash register, without saying a word to you and leaving you with tokens that only have the name….An empty shell, you who thought you had found the jackpot…

You understand, the right time is the worst time for the investor.

Finally, the crypto world is evolving rapidly and at incredible speed. We quickly become overwhelmed and we are also all hit by FOMO or the fear of missing an opportunity.

As a result, we tend to rush for fear of missing the opportunity and we neglect to read the white paper carefully, we neglect to consider the fundamentals. We are influenced by the behavior of others, etc.

Likewise, we can say that it is also the other side of the coin of decentralization. Anyone can list a token tomorrow Uniswap For example. And there it was, the very symbol of freedom and the ultimate democratization of finance for everyone.

DeFi is full of scams

But, this also means that people with poor ethics may also list tokens with the idea of emptying pools when the time is right. THE DEX are the perfect playgrounds for this type of people.

And, it seems so simple that there will still be rug pulls… Besides, there are many of them, only the media cannot list them all. Not only because it gives bad press (that's the right word) to the crypto universe, but it's rather because there are so many good projects in parallel that we rather want to "advertise" for projects that provide real solutions.

We can give you a rather recent example with the "TRUAMPLE" which 4 hours later, made a nice rug pull leaving with 1800 ETH. You can imagine that investors thought they had found the goose that laid the golden eggs. And, believe me, there are plenty of rug pulls! Among the new tokens that you see appearing, tell yourself that 1/3 will end up in rug pull. And, if not tomorrow, it will be the day after tomorrow.

Now that you know what Rug Pull is, the real question to ask is how to avoid it.

How to avoid Rug Pull?

Besides, there are a lot of bogus projects currently that smell musty and Rug pull... Sometimes, we can recognize them from afar, especially when it comes to cloned Uniswap protocols or pancake swap with dubious names of food tokens typically. Sometimes we even wonder how it is possible not to see anything! And, of course, nothing new is brought. No audit displayed. This is above all the signal…

The other signal is a sudden huge increase! For a brand new project, a new token that takes a “20x” in 24 hours, it would be good to be wary….

Yes, you are right in thinking that it is too good to be true…

It is up to investors to pay ever more attention and to understand the tokenomics overall view of the project in which they want to invest.

Don't rush too quickly, don't succumb to FOMO and above all take the time to fully understand the real usefulness of the project and the crypto. I cannot stress this enough.

Also be wary of projects with overly insistent or artificially created social networks. If we only talk to you about earnings and that alone, then take off, ok?

Make sure to also check that liquidity is blocked, as requested by the community with the project safemoon for example (because investors were starting to be wary and were afraid of a rug pull). You can check this on sites like Unicrypt for example to check that the pool is properly locked.

It is important, even crucial, to check that the liquidity is blocked, as requested by the community with the project safemoon for example (because investors were starting to be wary and were afraid of a rug pull).

Always do your research before investing

And, otherwise, as usual, consider the fundamentals and tokenomics, honestly, that's the only thing that will save you from bogus projects. A good team with a good background, a project with a real problem, a crypto that stands with a good issuance structure.

DYOR we keep telling you (Do Your Own Research).

Choose cryptos that stand in a good fundamental analysis. In short, this is how you invest in a successful crypto.

There are truly tons of opportunities to be seized! Really, you just have to be discerning.

So, yes, you are not going to make +50% in 1 day but you certainly will in a few months and even if it's a few years (for a larger amount and who knows, become a crypto-millionaire?), it's always better to have the certainty of having a portfolio that increases in value, and that you can sleep soundly….

Come on, take care of yourself and your wallet 😉