Crypto Back Treks: What They Are and How to Avoid Them

Crypto carpet pulling is causing billions of dollars in losses in the global crypto markets.

The cryptocurrency draw is an unfortunate but common phenomenon in the global crypto markets, leading to billions of dollars in losses for digital asset investors.

Read on to learn what crypto carpet moves are, how they work, and how you can identify and avoid them.

What is a Crypto Back Trek?

An Ruk is a type of exit scam that involves a team raising money from investors and the public by selling a token only to quietly shut down the project or suddenly disappear, stealing the raised funds and “investors ” (ie leaving their victims) behind. with worthless signs.

Retreats can be extensively orchestrated, with nefarious actors using social media influencers and hype-generating campaigns to attract as many victims as possible.

Some scams even use trusted key opinion leaders in the social space to gain trust. Others promise extremely high returns or offer exclusive digital goods, as seen in NFT rug pulls.

Crypto pullbacks can also occur when the project’s owners manipulate the value of a particular token or coin to deceive investors and then withdraw their investments.

Fraudsters often lure victims with a sudden, sharp increase in the token’s value in a short period of time. Once the price peaks, the people behind the token sell it to generate a profit while “investors” are left with steep losses.

Withdrawals often take place on decentralized trading platforms, which allow the fraudster to take advantage of the pseudonymity of DEXs.

Types of carpet covers

Upholsteries can generally be categorized into hard and soft carpet upholsteries.

Hard carpet pulls are more acute and sudden. Investors can lose all their funds within a short time. Soft carpet moves happen over a longer period of time. The core development team gives investors a false sense of security as they quietly close.

Common types of carpet covers include:

Liquidity draws: Malicious actors remove liquidity from a token pool, causing the token’s value to drop due to a lack of buyers and sellers.
Fake projects: Scammers create seemingly legitimate projects, collect investments and then disappear with the funds, leaving investors with worthless tokens.
Pump and shower: Fraudsters artificially inflate the price of a token through coordinated buying, only to sell their holdings at the peak and cause the value to drop.
Team Exit: The project’s team members suddenly disappear or leave, leaving investors without support and a collapsing token.

How to identify and avoid carpet pulls

Identifying and avoiding carpet pulls requires a combination of diligence and caution. Here’s how you can protect yourself:

Thorough research: Research the project’s team, technology, goals and community before investing. Look for red flags such as unfamiliar teams or lack of transparency.
Security Audits: Trusted projects often undergo third-party security audits. See if the project has been audited and review the audit report for vulnerabilities.
Community Involvement: Get involved with the project’s community on social media and forums. A strong and active community can indicate a legitimate project.
Warning signs: Be wary of unrealistic returns and returns, excessive marketing and pressure to invest quickly. Trust your instincts and avoid FOMO.

Finally, always ensure that you only invest money that you can afford to lose. Many cryptocurrency projects are experimental, and sometimes the failure of an idea can lead to the team pulling a soft rug, meaning they quietly stop supporting the project.

5 Biggest Crypto Carpets in History

While crypto carpet pulling has always been a spectacle in the industry, some scams have left a mark in the industry.

Here’s a look at five of history’s biggest crypto rugs.

OneCoin

OneCoin was a cryptocurrency-based Ponzi scheme promoted as a new digital currency that would revolutionize the financial world. The scheme was run by Ruja Ignatova, who claimed that OneCoin was backed by a team of experts and had a large network of distributors.

However, OneCoin was never actually backed by anything, and the distributors were simply paid to recruit new investors. When the scheme finally collapsed, investors lost more than $4 billion.

Thodex

Thodex was a Turkish cryptocurrency exchange hacked in 2021. The hacker stole more than $2 billion worth of cryptocurrency from Thodex users, and the exchange’s founder, Faruk Özer, then disappeared. Özer was later arrested in Albania in 2022.

AnubisDAO

AnubisDAO was a DeFi project launched in 2021. The project promised high returns to investors, but it was a drag. The developers drained the project’s liquidity pool and disappeared, leaving investors with nothing.

Uranium Finance

Uranium Finance was a DeFi project that promised to offer investors exposure to uranium mining, but it was still a while away. The developers of Uranium Finance drained the project’s liquidity pool and disappeared, leaving token holders with huge losses.

Squid Game Token

Squid Game Token was a scam cryptocurrency created in 2021, inspired by the popular Netflix series “Squid Game.” However, the sign was a carpet pull. The developers disabled the token’s ability to be sold, then disappeared with investors’ money.

Crypto scams remain a significant threat in the crypto space, preying on unsuspecting investors and causing significant financial losses.

By understanding the different types of pullbacks, learning how to identify early warning signs and implementing investment best practices, you can greatly reduce your risk of falling victim to these malicious schemes.