A lot of times people get rug pulled and it's usually not because they weren't smart enough but because they weren't aware of what they should have been on the look out for. These days scammers and hackers can be found everywhere including the crypto world. Some days ago, a 16 year old boy was apprehended with 48Btc accumulated from different frauds he had committed overtime. I am sure by now you are wondering just how smart that 16 year old boy is to have scammed people of so much. Well just like I noted earlier, there are many red flags you might have been ignoring which makes you a steady target for fake projects. So before you get rug pulled here are top 4 red flags to be on the look out for.
First, Who holds what and how much. Before you proceed to invest so much in that coin or token study it's holder portfolio. Many projects allow you see their total holders as well as the percentage they hold, if you happen to notice a larger percentage being held by a very small group of people then it's a red flag. These holders can influence the market in any direction very quickly and cause you to loose money before you can say Jack Dorsey. Many scam projects use tactics like this to make as much profit fast while leaving others to lick their wounds. Imagine buying a token at $0.4 and the major holders decide to sell their assets off,a sharp decline would follow leaving you with little or almost nothing. You would have to sell at a loss to get atleast some money out, chilly right?
Second, How good is it's whitepaper. A good whitepaper takes a long time to be created because lots of time, thinking and dedication is invested to make sure it embodies the entire project. I know many people close their eyes to this because the whitepaper looks too lengthy and complicated to read. Well it's that whitepaper or your money in ashes. A good whitepaper should cover every aspect on the project extensively, including the stats, usecases and every other factor related to the project. If a whitepaper looks too shallow, badly written or even similar to a sales letter then that's a red flag. If it's includes so many jargons without pointing to how exactly it can help the crypto world then you should avoid it. These people don't bother coming up with a 20 page whitepaper or more because they are trying to get in quick and get out so you can sniff them out from their whitepaper.
Thirdly, Why are the holders incredibly small. No matter how cute a project once it's holder are less than 10,000 then it's important that you watch from afar without putting in your money. A small population is a hot spot for easy manipulation by shams and the market can be pumped and dumped whenever the scammers wish. A lot of people get ropped in thinking they are early investors, but when you realise how off their whitepaper seems, coupled with their little population do stay off.
Lastly, does the layout look familiar or like a cheap knockoff. These people won't bother creating anything original and so they simply copy some other project and tada they are looking sparkly. If you sense something is off with their layout or their designs it's a red flag to stay away. There are so many other red flags to look out for like liquidity, unexplainable value, ridiculous lock periods and many more. That's why as a trader no matter how new or experienced you might be, always make sure to DYOR before investing.
