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?
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Nothing, they just have to be able to time it right. In many cases people who might suspect it’s an issue but keep seeing the gains so figure “just one more day and then I’ll sell” but then don’t because it’s a rug pull.
CSB: I once accidentally rode similar “pump and dump” scheme. Bought stock the day after an IPO when it was being hyped like crazy, even in the respectable press, saw 500% increase and then just got suspicious and concerned as the numbers flatly didn’t make sense anymore. Given the company and history prior to IPO and nothing really changed in its operations there was no way it was worth several times as much a couple weeks later. Sold up. The stock approximately doubled again within the next week and I’m all “aw man” and then *poof* the Dump rolled in. I checked in on it a couple years later and apparently a bunch of people were on trial for securities fraud related to the whole debacle.
There’s plenty of theory on “rational bubbles”. See Gali (2014) for example. It’s a bit much for me to really go into an ELI5, but no there’s nothing stopping you from trying to ride the bubble. It will be a risky endeavor, however.
Consider posting this over on a sub like /r/cryptocurrency.
You’ll get higher quality answers.
Crypto and stocks are the same you still need liquidity and in either case yes nothing stops you from buying low and selling high besides timing.
It’s just luck, you can get the money at any time, but you don’t know when the owner will get out all the money, so you either take it out now or wait to get it later because you’re Seeing that money is going up a lot.
If you get it at time, you win, if you wait too much, you lose.
Just because there are people scammed, doesn’t mean there are people playing Russian roulette with this, and then they move on to the next scam, to try to get out money.
What’s stopping them is they have no knowledge of when the rug is getting pulled and if you’re 1 minute too late you lose all your money.
It *could* happen that you sell all your shares/shit coins/whatever by chance at the exact right time, but that’s just dumb luck.
Its picking pennies in front of a locomotive. You don’t know when the rug pull will occur. A few % here and there is useless when it will all be lost instantly when you buy something that gets pulled right after you buy it.
Consider that a pump-and-dump scheme is effectively the same as any other crypto and stock trend. Save for the single person (or group) at the helm, everyone else is simply waiting for what they see as the opportune moment to sell. The fact that it’s an orchestrated scheme doesn’t make any difference to all other holders. You are, of course, free to sell whenever you want. So, in effect, you’re asking, “Why don’t people just sell their crypto/stock when it’s at its peak? Are they stupid?” And the answer, as you can hopefully surmise, is that everyone is equally ignorant of future trends. How would you know when it’s at its peak?
> is there anything that stops you from pulling out AFTER other morons buy in and BEFORE the founders pull out crashing the value?
Yes. The same thing that prevents anyone from selling anything at the perfect opportunity: they’re not omniscient.
The only realistic way to beat the rug pulls is to have a sell target and stick to it. The average trader doesn’t have enough liquidity to effect the market so just stick to your plan and learn the trading patterns. Crypto is particularly hard and risky but is also easier to have big percentage gains in a relatively small amount of time.
Usually, the initial members or early investors in a pyramid scheme do make money. A lot of people made money under Bernie Madoff. It’s why he was able to keep up his scheme for so long.
The problem is, if you make money on a scheme, you will likely invest that money back into the scheme. If you keep reinvesting your profits, you will eventually lose it all. You might think you’re smart and you will settle when you feel comfortable. But, if you’re the type of person trying to out-gamble the casino, you’re also the type of person that will never leave the casino until you’re bankrupt.
For example, you might be expecting a rug pull so you exit early for a bit of profit. The rug pull is taking longer than you anticipated so you reinvest and do it all again. Maybe the scheme is set to end in a year or longer and you begin to think it’s a legit operation, after all, you’re consistently making profit.
It’s a tight rope to walk.
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