Trading tips: How to smell a rug?
*A rug (or rug pull) is essentially a scam where the people behind a seemingly legit project disappear with all the money immediately after launch.
Rugpulls are something no one would expect to encounter when entering the NFTs market, but worryingly their occurrences are becoming more frequent and more sophisticated. It’s difficult to say whether a project is a rugpull or not. After all, early joining when a project is not yet well-known can also bring a huge profit opportunity. However, we can still list a few easy-to-spot abnormalities below for you to consider carefully and avoid being fooled when investing in any project.
1. Very expensive mint price
There are some projects whose mint costs are too high for the quality of their work. We're not just talking about the visuals of NFTs here (’cause sometimes ugly NFTs are still valuable in some ways) but also marketing and the required technical standards. Genuine projects will try to build quality well first, not squeeze as much money as possible from minting activities.
2. Limited sneak peeks
I'm always cautious with projects within only one or two sneak peeks. More so if the two sneak peeks look similar with minimal variety. Good projects always highlight their projects through their sneak peeks, and those are good marketing ways to attract people to mint.
3. Vague Roadmap
Projects that offer vague roadmaps are highly suspect. Especially their plan seems too good to be true. There are some projects that do well with little info on their roadmap, but these tend to lose steam after the initial hype.
4. Suspicious community
Projects with over 30,000 members but there is little interaction in the channels may mean that the server is heavily botted. Another way is to check the reactions on sneak peeks. The reactions should be from 5% to 10% of the total number of server members.
5. Movement of ETH
Movement of DAO funds from Project wallet to personal wallets is common but server members should be notified before it is released. A large movement of funds without notice may signal the start of the rug.
6. Undoxxed dev team
There are a lot of projects with undoxxed teams, but a combination of factors mentioned above may cause you some concerns. That's why some project devs dox themselves to add confidence to the project.
7. Rushed Mint
When the discord just opened up today and they are already minting in a week is clearly a red flag. It's already hard to build a solid community in a month, more so if it's just a week. Stay clear of these projects.