All across the crypto industry and mainstream finance, especially around the DeFi sector, the term “rug pull” has been used repeatedly to describe a very disastrous situation that occurs in decentralized finance and elsewhere in cryptocurrencies that can leave an investor with extreme losses.
The prevalence of the issue has become so widespread, even Dallas Mavericks owner and billionaire Shark Tank investor Mark Cuban was reportedly “rugged” as part of a DeFi protocol issue. The prominence of rug pulls in the industry suddenly put a damper on prices, and set back the market by months. It also has investors worried about where to put their capital.
Here is the full definition of “rug pull” as it pertains to cryptocurrencies and decentralized finance, its meaning, and how an investor can protect themselves in the market.
What Is A Rug Pull In Crypto?
The crypto industry is a wild west environment where anything goes. There is so much positivity and disruptive potential around every corner, but when there is promise and profits, there are also scammers and nefarious crooks waiting to steal from others.
Crypto having loose regulation, existing solely online in an all digital world, and existing outside of the normal realm of society has attracted even more criminals to the asset class, who appear as scammers, hackers, ransomware issuers, attackers, and more.
Many scammers appear to be a friend or an influencer, or a trusted account online representing someone like Elon Musk. Behind these accounts are a criminal who is posing as a trusted voice, and often asking for crypto in exchange for a larger sum in return. As too many have learned the hard way, these things are too good to be true.
The Various Types Of Ways To Get Rugged
Hacks and scams in crypto extend far and wide. They can appear as phishing attempts via email, or a suspicious looking URL that you accidentally clicked online that suddenly installs malware. Scammers have been known to spoof people’s SIM cards on their smartphones in order to gain access to sensitive information.
However, not all scams and situations involve such sneaky or behind the scenes tactics. And that is where the rug pull comes into play. These situations can’t just be swept under the rug because there is only one or a handful of victims involved. Rug pulls involve a much larger user base, often wiping out an entire market cap worth of capital.
Rug pulls are a blatant exit scam in most cases, designed as a promising project that attracts users. When liquidity flows into the project and the price grows, developers then pull all the liquidity they can, crushing the capital of those left holding the bags in the end.
Several major projects that had gained widespread attention, even again attracting some of the world’s most well known billionaire investors, were involved in such schemes, and resulted in enormous losses for everyone involved. Even with all the attention, developers disappear with everyone’s funds, never to be seen or heard from again.
How To Avoid Getting Rugged In Crypto
Avoiding such a situation isn’t easy, but it is wise to go with coins or protocols that have been around for plenty of time and are trusted. The largest gains and returns might come from some obscure new protocol or project, but that is also where all the risk lies. Considering the full risk versus reward is a must.
How then can crypto investors or token holders maximize their earnings potential without the risk of getting rugged? There are a variety of solutions available today, with one additional service about to debut in Q3 2021 that could make DeFi projects and situations like the above a lot safer overall.
Margin trading with cryptocurrency allows for similar profit potential and is a tried and trusted way to make money with crypto assets without risk of a rug pull. There is still risk involved, but with a stop loss order and proper technical analysis, risk can be kept to a minimum. PrimeXBT is a trusted award winning trading platform that offers such tools, and CFDs on crypto, forex, commodities, stock indices, and more.
How Covesting Yield Accounts On PrimeXBT Protect Against Rug Pulls
The same platform will soon debut the Covesting Yield Account System within the third quarter of 2021, in partnership with European copy trading developer Covesting. Covesting launched the COV token in 2017 and has proven four years later to build the token into a thriving ecosystem and copy trading module. With awards and a track record, there is very little risk of such situations as those outlined above.
Even better, PrimeXBT and Covesting are teaming up to soon offer what they are calling Covesting Yield Accounts, aimed at reducing the risk associated with top DeFi protocols and new users. To access DeFi protocols normally, users must self custody assets in an Ethereum wallet and connect it to the blockchain. This can be tricky for those without deep technical expertise and adds another layer of potential risk or pitfall.
With the Covesting Yield Account solution, crypto users can lock up idle tokens stored within a secure PrimeXBT wallet and earn a variable APY through top DeFi protocols. There is no need to connect with clunky interfaces, as it is all completed right from within the PrimeXBT dashboard under the Covesting tab.
By staking COV tokens also, anyone can increase the total APY generated by as much as 2x. Users who sign up to a growing waitlist get another 1% APY boost for the first month after launch. The tool is expected to be released at any point in this quarter – Q3 of 2021.
The emergence of an easy to use system is a must during a time when risk of rug pulls increases by the day, and a more trusted solution that balances the benefits of decentralized technologies with the safety of a centralized award winning platform like PrimeXBT all in one. More information about the Covesting Yield Account service is available at the company blog, which also includes trading tips, market insights, and much more.