With cryptocurrencies skyrocketing and soaring to new levels, more and more novice traders are getting into this exciting crypto investing game. All that makes the so-called ‘Crypto Wild West’ extremely attractive to scammers. Given the rise in crypto scams in 2021, awareness of common fraud types and how to protect yourself are more important than ever, especially for newbies and novice traders. PointPay experts believe that newbie investors are not aware of the potential pitfalls of cryptocurrencies, which makes them easy pickings for crypto scammers.
That’s why, if you’re a novice trader and want to start trading on a trustworthy crypto exchange like PointPay, you have to learn more about the most cryptocurrency scams and how to stay safe. Today, let’s find out more about ‘Rug Pull’ crypto scams and how to stay safe with PointPay. Let’s get started!
What is a ‘Rug Pull’ crypto scam?
A ‘Rug Pull’ cryptocurrency scam is a type of fraud when a team of developers creates a new token intending to pump its price, steal investors’ funds and then escape with all the stolen money. Such a crypto scam can also be related to exit scams and DeFi exploits.
A ‘Rug Pull’ is a form of fraud that lures early investors who think they’re lucky to get early access to potentially successful crypto projects or up-and-coming tokens. However, the reality is less optimistic, and investors are always left with valueless cryptos. This especially happens with tokens with zero fundamentals and no real future. PointPay experts always remind traders and crypto enthusiasts that if a deal sounds too good to be true, it probably is.
‘Rug Pull’ cryptocurrency scams got a lot of attention at the end of last year when a new digital token inspired by the Netflix series’ Squid Game’ lost all of its value. Why? Because it was revealed to be an apparent ‘Rug Pull’ scam. At first, the project marketed itself as a ‘Play-to-Earn’ cryptocurrency with high potential. It was listed on a decentralized exchange, and the scammers created hype around the project. Apparently, some investors got excited about this possibility and started buying the token, driving its price up. The SQUID token went from cents to about $90 and then $3,000 in minutes. After that, the fraudsters pulled the plug on the investment and stole more than $3 million! They left all the investors with a worthless token and empty-handed.
How to avoid a ‘Rug Pull’ and stay safe with PointPay
Even if it seems tricky and challenging, PointPay experts believe it is possible to avoid ‘Rug Pull’ scams. Here are some helpful tips and pieces of advice to follow:
Check the liquidity
One of the most common traits of a ‘Rug Pull’ crypto scam is when a new token has low liquidity. It simply means you will find it challenging to convert it into cash. PointPay experts highly recommend avoiding entering into projects with low liquidity as there are a lot of risks of unstable prices.
Do your thorough research
Do everything possible to learn everything about the project you’re planning to invest in. Do your thorough research, and check the team members on LinkedIn, Github, Facebook, etc. Pay close attention to the websites, Whitepaper, and third parties involved. Don’t think you just waste your time. Remember that it can save money you’re planning to invest.
Be skeptical of anonymous and unknown projects
‘Rug Pulls’ are often conducted by anonymous founders and developers who promise fast and easy gains. Nowadays, investors and traders must consider the credibility of the people behind new projects. Check if founders, backers, and promoters are well-known in the crypto community. Check their track record. If a project is entirely anonymous, it is definitely a red flag and might be a fraudster’s shield for ‘Rug Pulls.’
Pay attention to skyrocketing price movements
View with caution sudden massive swings and price spikes in new tokens. Seasoned investors are usually skeptical about such movements and always check the number of holders. Unfortunately, a small number of token holders makes the coin susceptible to price manipulation, and it also could mean ‘Whales’ can easily dump its price.
Stay with trustworthy crypto exchanges
When it comes to getting started with crypto and trading, everyone wants to make sure they use the best possible options and trustworthy trading platforms. Take a look at different options, check trading pairs, payment options, tools, safety services, and customer support. Even though picking a good crypto exchange takes some digging, it is worth it. However, you can always stay with PointPay, an ambitious crypto project that aims to become a full-scale cryptocurrency banking ecosystem.
In 2021, about $8 billion was stolen in ‘Rug Pull’ cryptocurrency scams. Investors trusted they were investing in legitimate and potentially successful crypto projects, only to be left with nothing.
As PointPay experts always say, you should always take your time to research new tokens and crypto projects and perform due diligence before investing.
Start trading on PointPay!
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