I’ve been wondering about it for quite some time, note that I know practically nothing how crypto market works.
Assuming you are jumping into a crypto project of a known scamer, like Mr. Logan. If you’re expecting it to be a rug pull, is there anything that stops you from pulling out AFTER other morons buy in and BEFORE the founders pull out crashing the value?
In: Technology
Most people let greed get in the way. They enter as price is rising because they don’t want to miss out but they already have. When their profits eek up very quickly most people begin to think they’re a genius and are going to make a killing. Right when it’s the best time to sell most people mutter under their breath “it can go a little higher” just before it drops. They see it drop significantly and say”jeez I need to wait for it to go back to where it was because I just lost those profits”. It drops again and the process repeats until there’s a sharp drop that really scares them then they sell right before there’s a slight rebound.
If you’re very lucky you could get in, wait for some sort of return, and then cash in and move on.
How do you decide when to move on? You can’t time the market because you don’t know what the scammers plan is.
You can’t keep an eye on market indicators and react to trends, Bloomberg don’t do live price tracking for these things. They’re so thinly traded that prices will be very volatile and all over the place anyway.
And even if you manage to get the timing right and try to sell right after the peak? You won’t find a seller, this isn’t the nyse there’s no market makers, nobody looking to pick up bargains and hold on to them until things get better. Nobody will want what you’re selling because everyone will know it’s all over.
That’s part of the scheme. They trick people like you into thinking that they have insider information and will be able to get out before the suckers do, except it then you find out that you *are* the sucker. This is often done very explicitly – you get an offer to join a “pump and dump group” on Telegram where they tell you the exact timing of their scheme, so that you can buy in early and dump at the right time… and then they dump before you do. You don’t even know how many layers deep the timing goes.
There is an entire class of scams which involve tricking the mark into thinking that they’re taking advantage of somebody else. They’re very effective. Not only do they prey on the mark’s greed, the actions the mark takes are often illegal or at least unethical, which means they can’t run to the police or the community for help. There’s a reason they say “You can’t fool an honest man.”
Besides what everyone else has said, remember: the money has to come from *somewhere*.
With a lot of investments, there’s genuine value involved in the whole thing. Most stocks and shares are supported by the company making profits and paying dividends. Bonds and savings accounts are supported by someone valuing money *now* enough to pay interest.
That’s not the case with rug pulls, but there’s still money *going* somewhere. There’s exchange fees, plus the person *doing* the rug pull is making money. That money doesn’t come from someone paying for genuine, real value – it comes from investors who got the rug pulled on them. It comes from the people who lost money on the whole thing.
Sure, if you’re particularly good at reading the situation – and a bit lucky – you can make money on a rug pull. However, the deck is stacked against you. There’s other people involved who are a lot more likely to make money, and the money has to come from somewhere.
The whole point in being the pump and dump whale is that you’re moving huge amounts rapidly while the masses a micromanaging small investments slowly.
Average joe doesn’t have the time to watch the market that much OR the incentive to move around small amounts of money for small gains because time is money too. That’s more or less why investment companies dominate investment. You have to have a big chunk of semi-disposable income to justify the brain cycles to micromanage your investments and the rest of us have jobs and lives to use up all those brain cycles.
You are gambling at a table where one party has all the cards and the best everyone else can do is straight up guess when they’re going to play their hand
It’s not impossible, only very hard. You don’t know when it will happen, and the creators of coins have millions of them for next to nothing so the rug pull can very easily happen while the price is still very low, but much higher than whatever they go theirs for.
The people buying into it are very hyped up about it and often have cultish behavior, thinking this will be the great next thing that will make them rich. Then at some point, the people who have created the coin and their friends decide when to pull out simultaneously, which tanks the price nearly instantly and that leaves almost everyone else at a huge loss. You can try to take your chances with it but it’s too dangerous and unpredictable.
2 things. Normal people usually can’t get enough investors to do much damage. Second they call it a ponzi scheme and send you to jail.
When you see the knife starts falling it will likely already be too late because there will be no liquidity left for you to sell. You have to time it so you sell while it’s on an uphill before the final crash.
>If you’re expecting it to be a rug pull, is there anything that stops you from pulling out AFTER other morons buy in and BEFORE the founders pull out crashing the value?
There is nothing from stopping you from doing this but there is also nothing stopping you from losing all your money because you pulled out too late or your selling crashed the price to below what you paid for your coins – i.e. it is a massive gamble for you.
The founders get around this by having very little money actually invested in the crypto as most of their expenses involve hyping up the crypto. They are also in control of ~~enough~~ all of the crypto to start with so that they rarely lose out regardless of how much they manage to sell before the market collapses.
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