Different Types of Rugs

April 18, 2024

In today’s issue:

  1. Different Types of Rugs

  2. How to Spot a Rug

  3. The Truth About Rugs

Different Types of Rugs

Finding a meme token launch without any suspicious activity is incredibly rare. Here are common tactics you might encounter:

  • Pulling Liquidity: Developers remove all liquidity from the pool, often after several large buys, leaving holders with a worthless token.

  • High Developer Supply: Developers hold a significant percentage of tokens and dump them post-launch or at their discretion.

  • Selling Bots: These bots distribute the retained supply among multiple accounts, making it difficult to detect but enabling simultaneous sell-offs.

  • Volume Bots: Used to artificially inflate trading volume, which could mislead investors about the token’s popularity.

  • Copycat Launches: Developers release a token under the disguise of a successful existing one, tricking investors into buying a fake.

How to Spot a Rug

You can identify potential rugs during a meme coin launch by using several tools and websites. For instance, Solana tokens can be checked using solscan.io to track the wallet that minted the token and its activities pre-launch.

Other resources include:

  • rugcheck.xyz: Offers a quick risk assessment of tokens, though it may miss some details.

  • Soul Scanner: A Telegram bot providing basic token information.

Remember to verify:

  • Liquidity lock status and liquidity pool contributions.

  • Token mint history and whether the address has launched other meme coins.

  • Distribution of tokens outside the liquidity pool.

  • Presence of volume bots by monitoring trade patterns.

  • Authenticity of the coin to avoid copycat scams.

A comprehensive guide to these tools will be featured in a future issue.

The Truth About Rugs

In our last issue, we discussed a seemingly safe meme coin which, upon further examination, involved distributing 20% of the supply to multiple wallets. These wallets sold their holdings during the token's initial price surge, funnelling proceeds into a single wallet now holding significant value.

This scenario is common in meme coin trading and is a predominant reason many traders end up unprofitable. Being aware of these practices allows you to make quick in-and-out trades, which is crucial if you opt for trading new token launches.

For those seeking less risky pursuits, consider sticking to older, more established meme tokens, which we will explore in an upcoming issue.