Hello and Welcome back to our channel. In this video, we will talk about Rug Pull in cryptocurrency, what are its faces and how to spot one. So make sure to watch the video till the end.
When a team pumps the token for their product before vanishing with the money and leaves their investors with a worthless asset, this is known as a rug pull.
Rug pulls occur when dishonest developers create new crypto tokens, inflate their worth, and then extract as much value as they can before leaving them when their value reaches zero. Rug pulls are a sort of decentralized finance (DeFi) exploit and exit scam.
Understanding the three main types of rug pulls is helpful before knowing how to recognize a crypto rug pull and why they occur.
What are the various types of rug pulls? There are three main types of rug pulls in crypto: liquidity stealing, limiting sell orders and dumping.
Liquidity stealing occurs when token creators withdraw all the coins from the liquidity pool. Doing so removes all the value injected into the currency by investors, driving its price down to zero. These “liquidity pulls” usually happen in DeFi environments. A DeFi rug pull is the most common exit scam.
Limiting sell orders is a subtle way for a malicious developer to defraud investors. Developers then wait for retail investors to buy into their new crypto using paired currencies. Paired currencies are two currencies that have been paired for trading, with one against the other. Once there is enough positive price action, they dump their positions and leave a worthless token in their wake.
"Dumping," when it comes to DeFi cryptocurrency rug pulls, is a question of how much and how quickly a coin is sold. In general, it's not unethical for crypto developers to buy and sell their own currency. Dumping is more of an ethical gray area than other DeFi rug pull scams.
