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DYOR (Do Your Own Research)
  • Do Your Own Research 101: Crypto Course
    • The Importance of DYOR
    • How to Navigate DYOR Challenges in Crypto
      • Scams and Fraud
      • Market Volatility
      • Rug Pulls and Exit Scams
      • Regulatory Challenges
    • How to Identify Worthy Crypto Projects
      • Market Trends and Indicators
      • Looking up Projects
      • ♨️How to use the CAPED framework for surface DYOR
    • How to Evaluate Crypto Projects
      • How to Check Product Health - Article 1
      • How to Check Tokenomics Health - Article 2
      • How to Check Token Transactions
      • How to Check Token Supply
      • How to Check Project Security
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  1. Do Your Own Research 101: Crypto Course
  2. How to Navigate DYOR Challenges in Crypto

Rug Pulls and Exit Scams

Rug pulls and exit scams are prominent risks in the crypto market. They occur when developers abandon a project after raising funds, causing the associated cryptocurrency's value to drop sharply.

SushiSwap is a prime example of such a situation. The project's anonymous creator sold off a significant portion of their tokens, which sent the price into a tailspin.

However, conducting thorough due diligence can help you steer clear of such risks. Before investing, it's essential to scrutinize the project's team, its code, and overall credibility.

Rug pulls and exit scams are often confused, but there are subtle differences between them. A rug pull is a more specific form of exit scam, wherein the liquidity is removed from a decentralized exchange, making it impossible for investors to sell their tokens.

In contrast, exit scams encompass a broader range of fraudulent activities, including when developers simply abandon the project after raising funds.

Understanding the project's roadmap and the team's past accomplishments can provide valuable insights. An important point to remember is that anonymity isn't always a sign of ill intent.

Bitcoin, the pioneer of cryptocurrencies, was created by the still anonymous entity, Satoshi Nakamoto. Despite this, Bitcoin has proven its resilience and legitimacy over time.

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Last updated 1 year ago