MONEY DECODED

Rug Pulls: When the Chart Only Goes Up Until It Hits Zero

A rug pull happens when the creators of a token or project suddenly take the money investors put in and leave. The price collapses to almost zero and holders cannot sell.

How it works

A new token is launched with heavy hype on social media and paid influencers. Early buyers see huge gains, which attracts more buyers. The creators control most of the supply or the trading liquidity. At the peak they sell everything or remove the liquidity pool, and the token becomes worthless within minutes. Some tokens are even coded so that buyers cannot sell at all.

Red flags

• Anonymous team and no working product.
• A few wallets hold most of the supply.
• Liquidity is not locked, or the lock ends soon.
• Promises of 100x, pressure to buy now, and influencers who were paid to promote it.
• You cannot find anyone who has successfully sold.

What to do

• Treat brand-new tokens as gambling, not investing, and only use money you can afford to lose.
• Check who holds the supply and whether liquidity is locked before buying.
• Be extra careful with tokens promoted in DMs or Telegram groups.