37% of cryptocurrency scams are already done using this method
When a person is deceived or betrayed, especially in the business world, one of the most well-known phrases is the old and traditional “pull the carpet”. Because this idiomatic expression has acquired a new meaning in the cryptocurrency universe: Rug Pull.
Rug Pull, which literally translates as “pulling the rug”, is the name of one of the most common and dangerous moves in this segment. To give you an idea, of the $7.7 billion in cryptocurrencies stolen worldwide in 2021, more than a third (37%) came from this method, according to a survey conducted by Chainalysis.
A Comparitech survey indicates that in 2022 there were almost 300 hits or “sweeps” – in the previous year the number was no more than 65 and was, until then, the historical record of the analysis.
But what is this coup and how does it happen? What precautions should investors and users take?
What is carpet traction?
The expression “pulling the carpet” makes perfect sense in this type of scam because the idea is precisely to deceive users and potential buyers of cryptocurrencies. The goal is to promote transaction fraud, so that people invest in tokens that have no value and purpose.
It is a scam that can occur in any environment, but is more common to occur on decentralized cryptocurrency exchanges. After all, in these environments the operations are completely automatic and practically anyone can include, exchange and sell a crypto asset.
Centralized exchanges, on the other hand, usually analyze the token and its financial viability before offering it for sale.
How does it work in practice?
Those accustomed to the financial market certainly know the acronym FOMO, which in English means “fear of missing out on something”. Basically, it’s the fear investors have of not taking advantage of good opportunities when they present themselves. Rug Pull addresses just that problem.
In it, a group of investors creates a token and makes it available on a broker. From there, they encourage the entry of different people to increase the value and perception of the market.
Then, when they have already raised a considerable amount, these developers simply abandon the project and the token loses its value completely.
What are the main types?
Basically, the Rug Pull can happen in three ways. The most common scam is pure cash theft. In it, the developers make the victims invest in the project, either directly or with stimuli on social networks. So they just take that money and disappear.
The figure of fake investors is also quite common. The coup project presents itself with a considerable number of participants, which attracts precisely those who do not have much experience.
As more people join, the token appreciates, allowing for higher earnings, until those responsible simply sell their stake, lowering the price and leaving everyone at a loss.
Finally, there is also the manipulation of the project itself, where the developers manage to prevent victims from selling their assets. Thus, the price of that crypto asset increases and the criminals simply take the profit and disappear.
How to avoid?
What makes the Rug Pull scam so effective is that in most cases it is not easy to identify that it is a scam. The developers manage to simulate all the movement common to cryptoassets well and fool even those much more experienced investors in the segment.
However, some tips are effective for identifying solid designs. The first step is to analyze who is behind the development of cryptocurrency. Avoid projects from people and/or companies that have had problems in the past.
Also, always be wary of promises that are too good, because they are almost always false!
Finally, watch for fluctuation in value and make sure sudden increases are justifiable.
It was only natural that sooner or later new scams would emerge in this segment. In recent years, the cryptocurrency market has grown significantly. While on the one hand this stimulates the entry of new investors and companies willing to improve the sector as a whole, on the other hand it also attracts people interested only in applying scams and committing crimes.
Therefore, as in all sectors, it is necessary to know how to separate the wheat from the chaff in order not to have major problems in the future.
John Blount is CEO of FMI Minecraft Managament – ​​​​​​fmi@nbpress.com.br.🇧🇷
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Source: Terra
Camila Luna is a writer at Gossipify, where she covers the latest movies and television series. With a passion for all things entertainment, Camila brings her unique perspective to her writing and offers readers an inside look at the industry. Camila is a graduate from the University of California, Los Angeles (UCLA) with a degree in English and is also a avid movie watcher.
