6 Ways to Avoid Crypto Rug Pull on DeFi

Crypto rug pull can cause huge losses for investors, and also damage the trust and image of the crypto industry. Therefore, it is important for investors to be cautious and alert to the potential for crypto rug pull, and take precautionary measures to avoid it.

What Is Crypto Rug Pull?

Crypto rug pull is a mode of fraud that often occurs in the crypto world, especially in the decentralized finance (DeFi) sector. In crypto rug pull, the actors will abandon the project they created after successfully raising funds from investors, and sell all the tokens they own on a large scale, causing the price of the token to plummet and harming investors.

Crypto rug pull usually occurs on new projects that are untested and not yet have a good reputation. The actors will create hype and buzz on social media, and offer high returns for investors willing to buy their tokens. However, once they are satisfied with the amount of funds raised, they will disappear and empty the project's wallet.

How to Avoid Crypto Rug Pull

Here are anticipatory ways to avoid crypto rug pull, namely:

Check crypto developers and projects

Before you decide to buy tokens from a project, you should do in-depth research on the project's background, vision, mission, goals, team, partners, and roadmap.

Check if it's audited

You should also check if the project has been audited by a trusted third party, and has valid licenses or certificates such as CertiK, Quanstampt, PackShield, Hacken, and others. Don't be easily tempted by sweet promises or false testimonials displayed by the project.

Check project activity on the blockchain 

You can use on-chain analysis tools, such as Etherscan or BscScan, to see the activity and transparency of projects on the blockchain network. You can see how many tokens the project team has, whether any tokens are locked or burned, how many tokens are circulating in the market, and how those tokens are distributed and moved. You can also see if there is any suspicious activity, such as a massive sale or transfer to an anonymous wallet, which could indicate the presence of crypto rug pull.

Follow the progress of the project on social media and the community 

You can follow the project's progress and communication on social media, such as Twitter, Telegram, Discord, or Reddit, and join the project's community. You can see if the project is active and responsive in providing the latest information and updates, as well as answering questions and feedback from users. You can also see if the project has good support and interaction from the community, or vice versa, gets a lot of criticism and complaints.

Avoid FOMO (Fear of Missing Out)

FOMO is the fear of missing an opportunity or missing a popular trend. FOMO can make you rush into investing, without considering the risks and consequences. FOMO can also make you easily swayed by other people's opinions or recommendations, without doing your own research. Therefore, avoid FOMO and do not rush into investing. Stay rational and critical, and don't invest more than you can afford to lose.

Diversify your portfolio

Portfolio diversification is a strategy to reduce risk by spreading your investments across a variety of different assets. By diversifying your portfolio, you can mitigate the negative impact if one of your assets experiences a crypto rug pull or a drastic price drop.

You can also increase your chances of profiting from other assets that are performing well. Therefore, diversify your portfolio and don't put all your eggs in one basket. Instead, allocate only a small portion of your portfolio to new or high-risk projects, and the rest to established and trusted projects.

Watch out for signs of crypto rug pull 

Crypto rug pull can happen at any time, without warning. However, there are some warning signs you can look out for, such as:

• A token price that rises unnaturally in a short period of time, for no apparent reason or positive news backing it up.
• Project teams are unknown, not transparent, or incompetent, and don't provide enough information or updates about their projects.
• Projects that don't have valid audits, licenses, or certificates, or have fake or forged audits, licenses, or certificates.
• Projects that copy or plagiarize names, logos, or concepts from other popular or successful projects.
• Projects that offer unrealistic or excessively high returns, or claim that their investments are risk-free or guaranteed profit.
• Projects that ask you to provide your personal information, credentials, or private keys, or send your tokens to an untrusted wallet or address.

Conclusion

Crypto rug pull is a mode of fraud that often occurs in the crypto world, especially in the DeFi sector. Crypto rug pull can cause huge losses for investors, and also damage the trust and image of the crypto industry.

Therefore, it is important for investors to be cautious and alert to the potential for crypto rug pull, and take precautionary measures to avoid it. Hopefully, this article is useful for those of you who want to invest in the crypto world safely and smartly.

How to Buy Crypto on Bittime

You can buy and sell crypto assets in an easy and secure way through Bittime. Bittime is one of the best crypto applications in Indonesia that has been officially registered by Bappebti.

To be able to buy crypto assets on Bittime, make sure you have registered and completed identity verification. In addition, also make sure that you have enough balance by depositing some funds into the wallet. For your information, the minimum asset purchase at Bittime is Rp10,000. After that, then you can make a crypto asset purchase in the application.

Monitor the price chart movements of Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.

Also Read:

Large-Scale Crypto Scams: Rug Pulls Targets Thousands of Victims

Recognizing Exit Scam Schemes in Cryptocurrencies

Pig Butchering Scam: Understanding Alarming Crypto Scam Schemes

DISCLAIMER: This article is informational in nature and does not constitute an offer or solicitation to sell and buy any crypto asset. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices may change significantly from time to time and Bittime is not responsible for fluctuations in crypto asset exchange rates.