What Is Rug Pull?
Rug pull means that liquidity is removed from a decentralized exchange liquidity pool, so your assets are not tradable.
Rug pull means a theft in which the owners of a cryptocurrency project abundant if after stealing investor money.
How Rug Pull Works?
The Scammers list their project into and the team trades a huge amount of ETH than the investors by these scam coins via ETH.
After that, the team takes their ETH by removing liquidity and making their coins worthless because nobody can sell.
Another major characteristic of a possible rug pull is a coin skyrocketing in price within hours.
For example, a rug pull coin can move from 0 to 50X within 24 hours.
This trick is meant to drive FOMO that leads more people to invest in the token.
How To Avoid Rug Pulls?
You should always check the amount of liquidity the team behind the project owner.
If they own almost all liquidity be aware of it as they can disappear whenever they want
How rug pulls are made possible?
Uniswap is a protocol that allows buyers and sellers to swap ERC20 tokens without an exchange or order book.
It uses an algorithmic equation that determines the swap rate automatically based on the balances of both tokens, as well as the actual demand for this swapping pair.
Since anyone can spin up a token and smart contract on Ethereum and list it on Uniswap, some developers have come up with rug pull operations.
The con begins with minting new tokens, creating Telegram groups to get the buzz going, followed by a Uniswap listing and injecting liquidity.
At this point, the original malicious liquidity provider would wait for people to swap their ETH for the newly minted coin, after which the token’s creators would drain the liquidity pool, leaving holders with nothing but a worthless coin.
We’ve seen other cons mint tokens of similar names to popular projects, too, then listing these on other DEX’s to try and capture investors’ funds before pulling the rug.
Thousands if not millions lost already
New coins are being listed on Uniswap and other DEX’s every single day.
And, to an extent, that’s to be expected.
Unfamiliar retail investors with no previous experience in the field are happy to spend their ETH on coins that are going to pull off a “10x” increase in 24 hours.
These new investors are normally suckered in via social media or chat groups, thinking they found the investment of a lifetime.
Crypto Twitter sees major accounts talking about new coins regularly.
A recent example comes from a coin mimicking Ampleforth (AMPL), called TRUAMPL (TMPL).
Someone was shilling “TRUAMPLE” yesterday, and 3 hours later, the developers pulled the rug, stealing 1800 ETH.
And that’s far from the only recent example, as rug pulls off the kind take place regularly.
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