Today’s booming NFT market has seen an unprecedented surge in investments, but it has also opened the doors to nefarious activities such as “rug pulls” where scammers can take advantage of investors. As an investor, it is important to understand how these scams operate and how you can protect yourself against them. In this article, we will
What Are Rug Pulls In NFTs and Crypto?
NFT rug pulls are a type of scam that is becoming increasingly popular in the world of cryptocurrency. A rug pull, which is also sometimes referred to as an exit scam or rug-pulling, is when an individual, organization, or project takes money from investors and then suddenly exits without providing anything in return. The term “rug pull” comes from the phrase “to pull the rug out” which means to abruptly take something away without warning.
Although NFT rug pulls have been around since 2019, they have recently become much more prevalent. This may be due to their high profitability and low risk; since there are no real-world assets backing up most non-fungible tokens, there is no way for the victims to recoup their losses.
How Do NFT Rug Pulls Work?
NFT rug pulls typically work in a few different ways. It is important to be aware of these tactics so that you can better protect yourself from falling prey to them.
One method is the use of a fake presale. In this type of scam, the scammers create a fake NFT presale and offer it at an incredibly low price. This lures in investors who are looking to make a quick profit, only to find out that the token is worthless after they have already purchased it.
Finally, some scammers may also use “pump-and-dump” schemes to target inexperienced investors. In this type of scam, the scammers buy a large number of tokens to artificially inflate their prices. They then encourage other investors to purchase the token, often through social media posts. Once enough people have bought in, the scammers then quickly dump all their tokens and leave with all the profits.
How To Avoid NFT Rug Pulls
There are several steps you can take to protect yourself against NFT rug pulls. First, be sure to use a free crypto portfolio tracker. Moonrig.io is a free crypto portfolio management software that enables you to monitor crypto in real-time. With instant crypto notifications you can spot any signs of suspicious activity before it’s too late
In addition, make sure you do your own research before making any investments. Be sure to read reviews and investigate the team behind the project to make sure that they are legitimate. Anonymous teams should be avoided at all costs as they are highly suspicious. Finally, never invest more than you can afford to lose and never invest in something you don’t fully understand.
