Rug Pull
A rug pull is a scam where developers abandon a project and run away with investors' funds. In meme coins, this typically happens when creators drain the liquidity pool, leaving token holders with worthless assets that cannot be sold.
Examples
- 1
Liquidity rug: Developers remove all liquidity from the DEX pool, making it impossible for anyone to sell the token. Price goes to zero instantly.
- 2
Honeypot: Smart contract code allows buying but blocks selling. Investors can't sell their tokens even though the price appears to be rising.
- 3
Mint function abuse: Developers mint millions of new tokens and dump them, crashing the price to near zero.
- 4
Gradual rug: Team slowly sells their allocation over time while promoting the project, eventually leaving when most value is extracted.
Related Terms
MEV
Maximal Extractable Value (MEV) refers to the profit that can be extracted by reordering, including, or censoring transactions within a block. In meme trading, MEV bots often frontrun or sandwich your trades to profit at your expense.
Slippage
Slippage is the difference between the expected price of a trade and the actual price at which the trade executes. In volatile meme coin markets, slippage can be substantial due to rapid price movements and low liquidity.
Why This Matters
Understanding rug pull is crucial for safe and effective meme coin trading. This is a key risk factor you should always consider before making trades.
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