Rug Pull In Crypto: What It Is And How To Avoid The Scam

Scamsters have defrauded thousands of people of an estimated Rs 200 crore across Himachal Pradesh by promising high returns in a short period through investment in crypto assets.

The gang, whose kingpin is yet to be arrested, used a Ponzi scheme method to lure people and also manipulated the prices of the cryptocurrencies they used to swindle money from investors.

According to the police, scamsters launched new crypto assets and also jacked up the prices of these digital currencies, which is called a rug pull in the crypto world.

So what is this rug pull?

A rug pull is a type of cryptocurrency scam in which developers of a new cryptocurrency project abandon the project and take investors' money with them. This can happen in a number of ways, such as by disappearing with the project's liquidity, disabling the project's website and social media accounts, or making it impossible for investors to sell their tokens.

Fraudsters also dump their own tokens on the market, causing the price to plummet in the rug pull.

Rug pull is basically derived from the English phrase to pull the rug out from under someone, means to remove support to somebody suddenly.

Rug pull is a major problem in the cryptocurrency industry, with billions of dollars lost to such scams each year. In fact, a recent report by Chainalysis found that rug pulls accounted for over 36 percent of all cryptocurrency scams in 2021.

How to avoid rug pull

There are a number of ways to avoid becoming a victim of a rug pull. The crypto investors need to be watchful about a few factors:

1. Do your research: Before investing in any cryptocurrency project, be sure to do your research and understand what the project is trying to achieve. Look at the team behind the project and see if they have a good track record.

2. Be cautious about high returns: Be wary of projects with high returns and low risk. If a project promises high returns with low risk, it's probably a scam. Cryptocurrency is a volatile asset class, and there is no such thing as a guaranteed investment.

3. Social Media hype may not always be true: Beware of projects that are heavily hyped. Scammers often use social media and other platforms to hype up their projects. Be wary of any project that is being heavily promoted without any substance behind it.

4. Risk tolerance: Invest only what you can afford to lose. Cryptocurrency is a high-risk investment, so only invest what you can afford to lose.

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