A coin can double in an hour and be worth nothing by lunch. That is a rug pull. A team launches a token, hypes it hard, waits for buyers to fill the trading pool, then pulls the money out and walks away. Holders are left with a token nobody will buy. It is theft, planned from the start. Not a crash. Not bad luck.
Key points:
- A rug pull is a planned exit: the team drains the trading pool or dumps its own coins, and the token's price falls to almost nothing in minutes.
- Three types exist: a hard rug pulls the pool at once, a soft rug sells slowly over weeks, and a honeypot lets you buy but blocks you from selling.
- A ten-minute check before you buy — locked liquidity, who holds the supply, and what the code allows — filters out most of them.
A rug pull is theft, not a crash
Most beginners get this wrong. They think a rug pull is just a coin that crashed hard. It is not. Any coin can crash and come back. A rug pull is different because someone planned it: the team builds the token, the hype, and the exit at the same time, and the money does not vanish into the market. It goes into their pockets.
In November 2021, the Squid Game token shot up on the TV show's fame, then fell to almost zero in minutes. The developers walked off with around $3 million, and holders could not sell on the way down — the code blocked them. AnubisDAO raised close to $60 million in under a day in 2021 with no website and no white paper, and the money left its trading pool about 20 hours later.
Solidus Labs scanned 388,000 new pools on Raydium, a Solana exchange, and found signs of liquidity being pulled in about 93% of them, with a typical loss of about $2,832 per pool. That is one firm's scan of one exchange, so treat it as a strong signal, not an audited count of every chain. Still, the shape is plain: The money was taken, not lost to the market.
The three ways a rug pull works
| Type | What happens | How fast | The tell |
|---|---|---|---|
| Hard rug | The team pulls the whole trading pool | Minutes | The price falls to almost zero at once |
| Soft rug | Insiders sell their own coins bit by bit | Weeks or months | A slow bleed while the team keeps posting |
| Honeypot | The code lets you buy but blocks you from selling | At once | You can buy in, but no sell ever goes through |
The warning signs show up before the price does
A rug pull leaves tracks. You just have to look for them before you buy, not after.
An anonymous team with no track record. A real team shows names, past work, and public talks. An anonymous team is not proof of theft — Bitcoin's own creator stayed anonymous — but it takes away all accountability. When nobody can be named, everything else has to be stronger.
Liquidity that is not locked. The trading pool is the pot of money that lets people buy and sell the token. If the team can pull that pot out, they can end the token at any moment. Check the lock and how long it lasts — a lock that ends next month is barely a lock.
One or two wallets holding most of the supply. Paste the contract address into a block explorer — Etherscan, BscScan, or Solscan — and open the holders tab. Ignore exchanges, pools, and burn addresses, then ask who controls the coins that can actually be sold. If a few wallets hold most of it, one sell can sink the price.
A contract nobody can read, or one that hides sharp powers. If the code is not verified, nobody can see what it does — walk away. Where the code is open, look for mint, pause, blacklist, setFee, and setMaxTx powers. They are not proof of theft, but they tell you exactly what can still be done to you. On Solana, check mint and freeze authority too: one lets its holder print new tokens, the other locks your coins so you cannot move them.
A pitch built on rush and big returns. "Buy now or miss it" is a sales trick, not proof of value. Loud promotion with no working product is the same trick in a different coat. A token with a handful of holders, no audit, and a slick website is a stage set, not a project.
Read also: How to Spot and Avoid Common Crypto Scams: A Beginner's Guide
Run the ten-minute check before you buy
- Open the token on DEX Screener. See how much liquidity exists, who controls it, and whether it is locked — and for how long.
- Paste the contract address into a block explorer and check the holders tab: who holds the supply that can actually be sold?
- Check the contract is verified, then run it through a scanner like Token Sniffer, Honeypot.is, or GoPlus — one that simulates a sell before you buy. Honeypots look perfect until you try to exit.
- Check the team and the audit. A named team with real history is not a promise, but an anonymous team with no audit leaves nobody to answer for the money.
- One red flag calls for a closer look. Several together are a good reason to skip the token. Never put in more than you can afford to lose.
My own read is blunt: If a coin needs you to buy in the next ten minutes, it does not need you at all. It needs your money.
What to do before your next buy
Write down three numbers before you buy any new token: the date the liquidity lock ends, the share of supply the top wallets hold, and the amount you can lose without changing your month. If the lock ends next week, the top wallets hold half the supply, or the amount is money you need, stop there. That note takes two minutes, and it is the difference between a bet you chose and a theft you walked into.
Read also: What Is a Liquidity Pool in Crypto? How Pools Power Every Swap
— BitByLine News Desk
This post is for learning only. BitByLine explains and teaches — this is NOT financial advice, and we never tell anyone to buy or sell crypto. If you buy, that is your own decision and your own risk, so do your own research first.
Read our full Disclaimer.
Sources: Orca Crypto, Banxa, Chainalysis, Solidus Labs, Medium
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