Have you stepped into the world of NFTs? Congratulations, then you belong to a very small group of people who make money trading NFTs.
The chance that you have stepped into a bad project or even a rug pull is increasing. Dozens of new sets come into the space every day.
Here you will receive a number of tips from us to recognize the signals of the rug pull projects. Don’t ask me how I came to know these signals 😉
In the beginning when the NFT world was just getting started, NFT projects were built with valuable communities around them.
The hype surrounding NFT trading has exploded in recent months. More and more people in the space are using their NFTs as a profile picture. But now NFT images can also be seen on cars, bags, clothing, watches, and other accessories.
But as in any market where a lot of money is involved, there are also people in the NFT world who want to make money in an unfair way. And so there are more and more so-called rug pull projects in space.
Rug pull projects are marketed very professionally. Such that they attract collectors to invest in the project.
As soon as the NFT project was revealed, they run off with ‘the loot’ and leave the buyers penniless. There is often nothing that can be changed and the buyers are left with a worthless NFT. Especially for the newcomers in the space, it is often difficult to recognize these rug pull projects.
They become the victims of this and lose their money. As a result, these people sometimes shout that the whole NFT world is a pyramid scheme, a scam, or one big fable.
That’s why you get tips from me to recognize these back-pull projects and not lose your money.
What is a rug pull?
We speak of a rug pull in the NFT space if the team of the set in question runs off with the money as soon as the set has been put on the market.
The rug pull NFT projects have a website with all kinds of great promises for the future, also called the ‘Roadmap’. But all this is based purely on false promises.
Besides the fact that the NFTs look good and beautiful, they create as much ‘FOMO‘ as possible around their project. This stands for “Fear Of Missing Out”.
They have a huge marketing machine running to promote their project.
Everything is aimed at getting as many people as possible to ‘buy in’ and leave their money behind!
Where is it going wrong?
Things go super fast in the NFT world. Projects can rise in price enormously in no time.
Everyone wants to take advantage of this. Because it all goes fast, the attention span is minimal. We often do not do enough research.
When we see a project on Twitter, Instagram, and OpenSea a lot, we quickly ‘trust’ that everything is going well.
More and more people are joining the project, so it must be good. The snowball effect has started and the ball is getting bigger and bigger. If someone already drops a critical note, it will quickly be seen as a ‘fudder’ by the team or the people who believe in the project. Someone who deliberately wants to destroy the project.
The team will do everything they can to make short work of this. They will also be actively trying to drive up the price.
They achieve this, among other things, by anonymously inciting people in Discord to buy as much as possible and to list as high as possible! This seems good for everyone, but only the anonymous team will benefit.
One of the biggest signals is if the team does not make itself known on the website.
Since the team is anonymous they get away with making a lot of money from this scam.
They disappear as quickly as they came.
Nobody knows who they are and the money has literally flown in. On to the next rug pull project!
The 5 signs to watch out for!
Although it remains difficult, there are a number of factors by which you can recognize a rug pull.
If you always do good research into a project and make decisions without emotion, you avoid losing your hard-earned money on a scam project.
A team that chooses not to come forward is not a good sign. It is important that you know who is behind the project. You want to know if they have experience and what reputation they have. What have the team members already accomplished in the past?
If a team starts from scratch and is also anonymous, this is not a good signal. You should not invest in such a project.
Almost every project has a website. This is used to announce the team and the roadmap. The origin and thinking behind the set are also communicated via the website.
View the website carefully and critically, do all the links work? Does the site look professional or was it put together quickly? If this is the case, there is a good chance that this does not have a long-term vision.
Does the website have a clear FAQ? It’s not the most important thing, but you should include it in your research!
Is there a Twitter account and how many followers do they have? If the account has only been around for a month and they already have tens of thousands of followers, this is often a red signal.
What impression do you get from the Discord chat? For example, if you ask a question, do you get an answer? Is there a lot of pushing to give likes, to buy a lot, or do you see other ‘aggressive’ statements?
Are there real people behind it or is it more artificial conversations with lots of bots?
Discord often uses fake profiles of well-known influencers. Or profile photos of BAYC and other big names in the Space are used to give the impression that they support the project.
Do your research, and make sure this account is real! Don’t take it blindly just because it’s there.
Promotion is used by all NFT projects. This is necessary to put and keep their project in the spotlight.
The scam projects are only aimed at making as much money as possible in a short amount of time; selling worthless tokens to you! They usually use paid marketing. This means that they use, for example, large Twitter accounts that bring their project to the attention of their followers.
Always do good research, even if you come across a set via such a large Twitter account.
The contract must be public, everyone must be able to view it. If not, this is not a good sign. Why would an NFT project want to hide the contract?
Scam project or not?
These are all signals that you should take into account when deciding whether or not to get into the NFT project.
But then again they are just that (signals) that can help to recognize the rug pull projects and not lose your money on this. It does not mean that if one of these signals is present, it is immediately a rug pull. But it is important that you always do your own research first.
If a project sounds too good to be true, it probably is! A project that comes about through organic growth is often more reliable than hype projects. Something that rises very quickly often falls just as quickly.
It’s not getting any easier to pick out the right projects, but they’re still there. And with the right research, you can find them too.
When you read this article you think maybe I should do this?
And my answer to that is YES!
With the right DYOR, (Do Your Own Research) and not just ‘blind’ following the hype, you can achieve great success.
Research the team, Twitter, and the website, and ask questions in Discord. Make sure you know who is behind the project. Has this team had success before in the NFT Space or otherwise?
If Lamborghinis, other crazy gifts or amounts of money are promised, take an extra critical look at the project.
Make sure you are always fully informed about the NFT project. Don’t let your emotions play a role, that’s usually not a good sign!
And as I always say. Only invest with money you can afford to lose!