A rug pull is a crypto exit scam: a project's creators attract investment, then suddenly pull out the value — draining liquidity or dumping their tokens — and disappear, leaving holders with worthless coins. This guide explains how they work and the red flags.
How a rug pull works
The pattern is always the same: build trust around a new token or project, attract buyers, then remove the value that made it attractive [1]. In a "hard" rug pull, malicious code or developer control is built in from the start — for example, the team holds the liquidity and withdraws it, or a hidden function blocks selling. In a "soft" rug pull, the team quietly abandons the project and sells its holdings over time [2].
Red flags to watch
How to protect yourself
Favor projects with audited code, locked or renounced liquidity, transparent and identifiable teams, and realistic claims. Be wary of anonymous teams, guaranteed-return promises, and tokens you cannot sell. If something feels engineered to rush you in, slow down (see our common crypto scams guide).
The bottom line
A rug pull is an exit scam where insiders remove the value holders relied on. Knowing the red flags — locked liquidity, audits, team transparency — is your best defense. To keep learning the fundamentals, follow more from Bitbase Academy.
Disclaimer: This article is educational content from Bitbase Academy, provided for information only. It does not constitute investment, trading, tax, or financial advice. Written as of June 2026; refer to the latest official information.
References
[1] Coinbase, "What is a rug pull and how to avoid it?" coinbase.com
[2] Crypto.com, "What Is a Rug Pull in Crypto and How to Avoid It." crypto.com
