How Does a “Rug Pull” Differ from a “Pump and Dump” in the Crypto Space?
A pump and dump involves manipulating the price of an already existing, often low-cap, coin. A rug pull, however, is typically associated with a newly created token by the project developers themselves.
In a rug pull, the developers drain the liquidity pool after launching the token, effectively stealing the funds raised from investors. The token's value immediately drops to zero, and the project vanishes.
The key difference is the involvement of the project's own creators.
Glossar
Rug Pulls
Deception ⎊ The term "Rug Pull" within cryptocurrency, options trading, and financial derivatives denotes a deceptive practice where developers or project founders abruptly abandon a project, taking investor funds with them.
Liquidity Pool
Mechanism ⎊ A liquidity pool functions as an incentivized counterparty in decentralized finance, aggregating capital from multiple participants to facilitate trading without traditional intermediaries.
Decentralized Finance
Architecture ⎊ Decentralized Finance, within the cryptocurrency ecosystem, represents a paradigm shift in financial infrastructure, moving away from centralized intermediaries towards peer-to-peer systems leveraging blockchain technology.
Pump and Dump
Scheme ⎊ The pump and dump is a classic market manipulation scheme, adapted for the crypto space, where perpetrators artificially inflate the price of a low-liquidity asset through coordinated buying and misleading promotional efforts.
Decentralized Exchanges
Access ⎊ These platforms offer permissionless entry to cryptocurrency and tokenized asset markets, democratizing capital deployment into novel financial structures.