“With the rise in the decentralized space of the crypto world, numerous scam cryptocurrencies are being created to rug pull the new investors who end up losing money. Investors must research each cryptocurrency project before investing in order to avoid such scams and secure their investments.”
What are Crypto Scams and how are they Executed?
To get ‘rug pulled’ is the latest slang in the crypto world for the investors that are robbed off their money by the scammers who create a fake currency and pump its price quickly to attract more investors and then suddenly disappear with all the investor’s money. These types of crypto scams have been increasing lately and sound an alarming situation for the new investors entering the crypto market.
The scams are executed in a planned way where a cryptocurrency is floated in the market and various fake accounts and websites are created on the internet to support and create a hype regarding that cryptocurrency. Once the hype is created, investors keep on investing and the price keeps rising until the scammers decide to disappear forever with all the invested money.
The Squid Game Token: Case Analysis
Squid Game token was the most recent cryptocurrency scam that resulted in a loss of $3.2 Million to the investors. Squid Game token (SQUID) was created as a play-to-earn token on the Binance Smart Chain at the end of October 2021. The token was created soon after the popular Netflix series Squid Game’s season was concluded thus using the popularity of the series to create hype for the token.
Soon after the token was launched, hundreds and thousands of Telegram, Instagram and Facebook accounts popped up talking about the potential of the new token. This created a FOMO (Fear Of Missing Out) in the market and every investor started investing without performing a background check. On November 1, 2021 the token’s price rose to $2856.64 per coin gaining 33,600% within a few hours and then suddenly fell to $0 per token.
How not to get ‘Rug Pulled’?
There are certain red flags that must be monitored closely before investing into a new cryptocurrency and are discussed here:
The new crypto projects take time to develop and to build a base and to earn the trust of the investors. Any project that is launched in a hurry and uses the name of some other company or entity as Squid Game scammers used the hype of a popular Netflix series is a red flag and you must steer clear of any such investments.
Any project to gain popularity takes time, sometimes even years after development. If any coin gains popularity overnight and as in the case of Squid Games where hundreds of fake accounts started talking about the coin overnight hoists a red flag that you should never even think of holding.
If any crypto token or project has an anonymous team or people who showed up from nowhere, these projects must be avoided at all costs as these people after disappearing will be the most difficult to track. This is another red flag that must be checked.
Avoid Non-Reputable Exchanges
Reputable exchanges have a policy of pre-listing verification of the coins that ensures for the investors that the listed coin is an original project and will not result in a scam. Avoid trading on any Non-Reputable Exchanges.
Disclaimer: The article is meant for the educational purpose only and in no way it should be considered as financial advice. Own research on the topic is advisable.
Photo by – Andy Hermawan on unsplash