Rug Pull Explained: How It Works and How to Avoid It in Crypto Trading
A rug pull is a deceptive practice in the crypto market where developers or insiders create a new token—often a meme coin—and then suddenly withdraw all liquidity from the trading pool. This action leaves investors unable to sell their tokens, resulting in a total loss of their investment. The term "rug pull" metaphorically means pulling the rug out from under unsuspecting investors. Rug pulls are especially prevalent in decentralized finance (DeFi) and meme coin launches, where project transparency is low and regulatory oversight is minimal.