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Rug pull is one of the most notorious scams in the crypto space, leaving investors with disastrous losses. These tokens often lure investors with promises of high returns only for the devs to vanish with investors' funds or dump the tokens leaving behind a trail of losses. Just recently the we have seen some tokens that were rugged.
Recent Rugged Tokens
Hawkcoin ($HAWK)
$HAWK was promoted by internet personality Haliey Welch, known as the "Hawk Tuah Girl," this memecoin experienced a dramatic crash shortly after its release. The market value plummeted from approximately $490 million to $26.4 million following significant sell-offs. Allegations of insider trading and a pump-and-dump scheme have surfaced, though Welch denies these claims.
Gen Z Quant Token
A teenager created and promoted this crypto via streaming. The kid made over $50,000 by by selling off his holdings, causing the token's value to collapse.
These are just recent examples. There have been countless of incidents of rug pulls in the crypto space and yet a lot of people still fall victim to these scams.
Why Do People Fall Victim to Rug Pulls?
Greed
Many rug pulls promise high returns, which attract investors looking for quick profits. Some investors even consider of holding for the long-term due to pressures of community discussed below. This greed blinds people to potential risks or red flags.
Community Psychology
Most tokens start with a community who believe in the promises of the devs. Belonging to a community who share similar beliefs, an investor would be more optimistic and less skeptical. Those who will question the project will be accused of spreading "FUD" and be attacked by the community.
Social Media Hype and Influencers
Just like the Hawk Tuah Girl case, scammers use social media platforms and influencers to promote their project. Endorsements from trusted personalities will attract more investors which usually are the influencer's fans.
How to Avoid Rug Pulls
Research the Team Behind the Project
Developers and team members who are transparent about their identities are less risky compared to anonymous teams. Check if they have previous projects and their reputation in the crypto community.
Study the Tokenomics
If a large percentage of the token supply is held by the team or a small group of wallets has a big risk of sudden dump. Check if there are lock-up periods for team-held tokens to prevent selloffs by them.
Check the Community and Hype
Avoid tokens with cult-like communities that discourage questions. Just recently, I saw a token on twitter which has no clear project, the community was like a cult and their reason for investing was blind trust in the devs. Some members even had a tattoo of the token symbol.
Avoid Unrealistic Promises
When a promise is too good to be true, then it probably is! Be careful and skeptical if a token guarantees extremely high returns or quick profits. This is a trap for inexperienced or investors who easily believe false promises.
Conclusion
Rug pull scams reminds us of the risks in crypto. While the promise of getting rich can be tempting , we must remain skeptical, do research (DYOR), and exercise caution to avoid being victimized.
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