Update - August 29, 2024
Play It Smart and Leave No Stone Unturned in Crypto
Have you ever heard of the phrase “rug pull”?
It’s a common term in the crypto market for a type of scam where the developers of a cryptocurrency or a decentralized finance (DeFi) project suddenly withdraw all the funds from the liquidity pool and disappear, leaving investors with worthless tokens.
For instance, last week hackers from India took over the McDonald’s Instagram account, which has over 5 million followers. Soon after, they began posting about a new Solana (SOL) token called Grimace. (Named after the purple character from McDonald’s.)
The hype generated from the official-looking posts convinced many to invest quickly, sending the price of the newly created memecoin Grimace from $0.0007471 to $0.026 in under an hour. That’s a hefty 3,380% gain.
But unfortunately for anyone who saw the post, this gain was short-lived…
As the scammer “rug pulled” this project, disappearing with $700,000 in ill-gotten gains. Worst of all, it left investors with nothing but worthless tokens and this unsavory message on McDonald’s Instagram account…
These rug pull scams are particularly devastating because they often targets retail investors who are attracted by the hype and potential for quick profits.
This Is Nothing New
“Rug pulls” are common in the crypto world, where new projects can launch with minimal regulation. This makes it easy for scammers to execute their schemes and vanish with millions of dollars.
For instance, in 2021, during the height of the crypto bull market, a project inspired by the popular Netflix show Squid Game launched a token called the Squid Game Token.
The project gained massive attention, causing the token’s price to skyrocket by over 230,000% in just a few days. However, the developers behind the token executed a rug pull, disappearing with over $3 million and leaving investors with tokens that were completely worthless.
Back in 2019, the PlusToken scam was one of the largest crypto Ponzi schemes ever, when over $2 billion worth of Bitcoin, Ethereum, and other cryptocurrencies were stolen from investors who believed they were participating in a legitimate investment opportunity.
And even earlier, there was OneCoin, one of the most infamous crypto scams in history. Launched in 2014, it was marketed as a revolutionary new cryptocurrency, but it was nothing more than a multibillion-dollar Ponzi scheme. The founders disappeared with an estimated $4.4 billion, and to this day, many of those responsible have not been brought to justice.
These scams serve as stark reminders of the risks in the crypto market, particularly for retail investors who may be drawn in by the promise of quick gains. Always be cautious, do your research, and be wary of projects that seem too good to be true.
Waiting on the Technicals to Improve
When it comes to crypto, you can’t get caught up in the hype of chasing the new “hot thing.”
It’s OK to speculate. But you need to be aware that this market is constantly trying to take money from you. That’s why I always steer you toward legit projects with solid use cases like ChainLink (LINK), Solana, and VeChain (VET).
I am currently being patient with these positions. Bitcoin (BTC) is still below its 200-day moving average. And with the 50-day MA crossing below the 200-day MA on August 6, the chart has officially made a “death cross”…
That doesn’t mean the bull market is over. Far from it. However, it’s a good time to exercise patience with your crypto positions.
And if I’m buying anything here, I’m sticking with tried-and-true holdings like Bitcoin, Ethereum (ETH), and Solana.
Most of all, I’m staying away from the majorly speculative stuff… like Grimace.
Because as Warren Buffett says, the first rule of investing is to “not lose money.”
And I plan to keep honoring that.
