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How Do I Know If a Coin Is a Rug Pull? Essential Detection Guide for 2025

Learn how to detect rug pulls early using warning signs, smart contract audits, and advanced tools like Token Metrics to navigate crypto safely in 2025.
Token Metrics Team
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The cryptocurrency market offers tremendous possibilities for investors, but it also involves notable risks. Among these dangers, rug pulls stand out as particularly damaging scams where developers abandon projects after raising funds, leaving investors with worthless tokens. With rug pulls accounting for approximately 37% of all crypto scam revenue and costing investors nearly $3 billion annually, learning how to detect these schemes early has become crucial for every crypto participant.

The term "rug pull" originates from the phrase "pulling the rug out from under someone." Typically, a project may seem promising with rising prices and active community support, only to suddenly collapse when developers vanish with investor funds. Such scams are especially common in decentralized finance (DeFi), where listing tokens often involves minimal oversight and regulation.

This detailed guide aims to equip you with the knowledge, tools, and analytical strategies necessary to recognize rug pull warning signs, protect your holdings, and navigate the crypto space more securely in 2025.

Understanding Rug Pulls: What They Are and How They Work

A rug pull is a type of cryptocurrency scam where developers create a project, attract investors through hype and promises of high returns, and then abruptly withdraw funds or abandon the project, leaving participants with worthless tokens. These exit scams are often carefully orchestrated to maximize theft before the project’s collapse.

The Anatomy of a Rug Pull

Rug pulls exploit trust and hype within DeFi ecosystems, particularly on decentralized exchanges where token listing is straightforward and lightly regulated. The common pattern involves:

  • Project Launch: Developers introduce a new crypto or DeFi project with flashy marketing and high-yield promises, often with professional-looking websites and social media presence.
  • Hype Generation: Social media campaigns, influencers, and crypto forums generate buzz. Investors rush to buy tokens amid FOMO, causing rapid price increases.
  • Liquidity Build-Up: As demand rises, liquidity pools grow, giving an illusion of success. This phase can last days or months depending on scam sophistication.
  • Sudden Exit: When the scammer deems the target reached, they drain liquidity, dump tokens, or abandon the project, causing prices to plummet to zero.

Types of Rug Pulls

Understanding different scam methods helps in identifying vulnerabilities:

  • Hard Rug Pulls: Developers embed malicious code in smart contracts enabling them to withdraw liquidity at will, prevent sales, or mint unlimited tokens. These are premeditated and often illegal scams.
  • Soft Rug Pulls: Developers abandon projects after selling off substantial holdings, leaving the community behind. Though not always illegal, they are unethical.
  • Liquidity Pulls: Liquidity is removed from pools, causing value collapse. Developers might create pools pairing new tokens with established cryptocurrencies, then withdraw liquidity.
  • Dumping Schemes: Coordinated selling by insiders causes market crashes, often after artificially inflating prices.
  • Limited Sell Orders: Scammers restrict token sales to specific addresses, trapping other investors’ funds.

Critical Red Flags: Warning Signs of Rug Pulls

Spotting rug pulls early involves recognizing common warning signs:

Anonymous or Unverified Development Teams

If the project team’s identities are hidden or unverifiable, it’s a red flag. Legitimate projects list known founders with credible backgrounds on platforms like LinkedIn. Fake profiles and purchased followers are indicators of suspicious activity.

Missing or Inadequate Smart Contract Audits

Trustworthy projects undergo third-party security audits. If a project lacks an audit or refuses to share reports, caution is advised. Verify audit reports independently through the auditing firms’ websites.

Unlocked Liquidity Pools

Check whether liquidity pools are locked using tools like GeckoTerminal. Unlocked pools or those with expiring locks can be drained anytime, increasing scam risks.

Irregular Token Distribution and Whale Concentration

Examine token holdings on explorers like Etherscan. Large holdings by few addresses suggest potential for price manipulation or dumping. Spread-out distributions are safer.

Unrealistic Returns and Yield Promises

Promises of extraordinary yields—such as double-digit daily APYs—are typical red flags. Such schemes are often Ponzi or scams and not sustainable long-term.

Vague or Missing Whitepapers

Legitimate projects publish detailed whitepapers explaining technology, tokenomics, and roadmaps. Vague, plagiarized, or missing documents indicate potential fraud.

Excessive Marketing and FOMO Pressure

Overhyped campaigns, artificial urgency, and influencer-driven FOMO can signal scams. Genuine projects focus on delivering value over hype.

Sudden Unexplained Price Spikes

Artificial surges without fundamentals are common on scam tokens before they crash. Monitor news and fundamentals to verify price movements.

Poor Smart Contract Code Quality

Substandard or suspicious code on blockchain explorers signals inexperienced developers or malicious intent. Use analysis tools like Token Sniffer to evaluate contract safety.

Low Trading Volume

Authentic projects typically maintain active trading. Declining volume suggests loss of interest or impending exit scams.

Tools for Detecting Rug Pulls

Technological tools are vital for early detection:

  • GeckoTerminal and DEX Scanners: Provide liquidity lock status, holder analytics, and suspicious activity detection.
  • Blockchain Explorers (Etherscan, BscScan): Allow deep dives into smart contracts, transactions, and token distributions to spot red flags.
  • Token Sniffer and Security Platforms: Use AI-driven analyses to assess contract safety scores and identify malicious code patterns.

Leveraging Token Metrics for Rug Pull Protection

While automated tools help identify immediate risks, platforms like Token Metrics offer comprehensive insights powered by AI to evaluate project legitimacy and risks better. They analyze project teams, smart contract security, liquidity, community sentiment, and historical patterns to detect potential scams.

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Best Practices for Avoiding Rug Pulls

  • Conduct thorough research: Investigate project backgrounds, teams, code, and communities. Verify claims independently.
  • Start small and test projects: Invest minimal amounts initially, increasing only after sustained legitimacy.
  • Verify liquidity lock status and audits: Use tools to confirm liquidity is locked and check audit reports for security.
  • Monitor community engagement: Engage with project communities and observe transparency and responsiveness.
  • Use reputable exchanges: Prefer well-known platforms with stricter vetting processes.
  • Diversify investments: Spread over multiple projects and assets to reduce risk exposure.
  • Stay informed: Follow trusted news sources, security platforms, and community alerts.

What To Do If You’ve Been Rug Pulled

Even with precautions, scam damages can occur. Immediate steps include:

  1. Report the scam: File reports with community platforms like Chainabuse, SEC, or FTC. Share detailed evidence.
  2. Warn others: Post factual warnings on social media, Reddit, and community channels with transaction details.
  3. Document everything: Keep records of transactions for potential tax claims and future analysis.
  4. Learn from the experience: Analyze missed signs and refine your research process for future investments.

Conclusion: Staying Safe in Crypto's Wild West

Rug pulls pose a significant threat, costing billions annually, but awareness and analytical tools can mitigate risks. Recognizing red flags such as anonymous teams, missing audits, unlocked liquidity, and unrealistic promises is vital. Employ platforms like Token Metrics for in-depth risk assessment and project validation.

Combining vigilant research, disciplined investing, and AI-powered analytics helps navigate crypto securement. Remember, if something seems too good to be true, it likely is. Protect your investments and participate responsibly in this exciting, fast-evolving industry in 2025 and beyond.

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Token Metrics: AI-powered crypto research and ratings platform. We help investors make smarter decisions with unbiased Token Metrics Ratings, on-chain analytics, and editor-curated “Top 10” guides. Our platform distills thousands of data points into clear scores, trends, and alerts you can act on.
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Recent Posts

Research

How Do I Keep My Cryptocurrency Safe?

Token Metrics Team
8 min

The cryptocurrency market has created life-changing wealth for millions, but it has also attracted hackers, scammers, and bad actors. From exchange hacks to phishing scams and rug pulls, billions of dollars in crypto have been lost due to poor security practices.

If you’re serious about trading or investing in crypto, one of your top priorities should be keeping your cryptocurrency safe. In this guide, we’ll walk through the biggest risks to your crypto security, best practices to protect your assets, and how Token Metrics can help you make informed, safe decisions when navigating the crypto market.

Why Is Cryptocurrency Security So Important?

Unlike a traditional bank account, cryptocurrency transactions are irreversible. If your funds are stolen, there’s usually no way to recover them.

  • No centralized authority: There’s no bank to call for refunds.
  • Pseudonymous transactions: It’s nearly impossible to trace funds once they’re moved.
  • High-value targets: Hackers actively target crypto investors due to the potential for large payoffs.

This means you are your own bank—and you’re responsible for protecting your funds.

Common Threats to Your Cryptocurrency

Before learning how to protect your crypto, you need to know what you’re up against:

1. Exchange Hacks

Crypto exchanges are frequent targets for hackers. Even top-tier exchanges like Mt. Gox and FTX have experienced devastating losses.

2. Phishing Attacks

Scammers use fake websites, emails, or social media accounts to trick you into revealing your private keys or login credentials.

3. Malware & Keyloggers

Cybercriminals install malicious software on your devices to steal passwords and seed phrases.

4. Rug Pulls & Scams

Fraudulent projects lure investors with promises of high returns, then disappear with the funds.

5. Human Error

Lost passwords, mishandled private keys, or accidental transfers can lead to permanent loss of funds.

How to Keep Your Cryptocurrency Safe

Here’s a step-by-step approach to safeguarding your crypto:

1. Use a Secure Wallet

Hardware Wallets:

  • The safest option for long-term storage.
  • Devices like Ledger or Trezor keep your private keys offline, out of reach of hackers.

Software Wallets:

  • Convenient for active trading but more vulnerable to attacks.
  • Use reputable wallets like MetaMask or Trust Wallet and enable strong security features.

Pro Tip: Use a hardware wallet for long-term holdings and a software wallet for small, active trading balances.

2. Enable Two-Factor Authentication (2FA)

Always enable 2FA on your exchange accounts, wallets, and email addresses.

  • Use Google Authenticator or Authy, not SMS-based 2FA, which is susceptible to SIM swaps.

3. Beware of Phishing & Fake Websites

  • Double-check URLs before logging into exchanges or wallets.
  • Never click links from suspicious emails or DMs.
  • Bookmark the official websites of your exchanges and platforms.

4. Keep Your Seed Phrase Offline

Your wallet’s seed phrase is the master key to your funds.

  • Write it down on paper and store it securely (safe, vault).
  • Avoid storing it in digital form (cloud storage, photos).
  • Consider splitting the phrase into parts and storing them in separate locations.

5. Research Projects Before Investing

Many scams and rug pulls target uninformed investors chasing hype.

How Token Metrics Helps:

  • Use AI-powered Investor Grades to assess projects for long-term viability.
  • Leverage Moonshot Finder to discover vetted early-stage tokens with real growth potential—not scams.

6. Diversify Your Storage

Don’t keep all your crypto in one place.

  • Use multiple wallets for different purposes (trading vs. holding).
  • Spread funds across hardware, software, and exchange wallets.

7. Stay Updated on Threats

The crypto landscape changes fast.

  • Follow credible crypto news platforms.
  • Monitor regulatory updates and security alerts.
  • Use Token Metrics to stay ahead of market narratives and avoid projects flagged as high-risk.

How Token Metrics Helps You Stay Secure

While Token Metrics isn’t a wallet or exchange, it’s a powerful AI-powered platform designed to help you make safer investment decisions.

1. AI-Powered Risk Analysis

Token Metrics uses AI-driven evaluations to score projects, helping you avoid high-risk tokens and scam projects.

2. Investor & Trader Grades

Our proprietary grading system helps you quickly identify safe, high-quality assets for both short-term trading and long-term holding.

3. Moonshot Finder

Interested in low-cap tokens? The Moonshot Finder helps you spot legitimate early-stage projects before they pump—without falling into scams.

4. Narrative & Market Tracking

Stay ahead of emerging narratives and security concerns with Token Metrics’ real-time AI-driven analysis, helping you dodge risky trends.

Practical Security Checklist for Every Crypto Holder

  1. Use a hardware wallet for long-term holdings.
  2. Enable 2FA on all accounts—never rely on SMS-based security.
  3. Store seed phrases offline and securely.
  4. Avoid suspicious links and verify all URLs.
  5. Research every project using platforms like Token Metrics.
  6. Diversify storage across multiple wallets.
  7. Stay informed about new threats and market risks.

Final Thoughts

So, how do you keep your cryptocurrency safe? It comes down to strong storage practices, personal vigilance, and making informed investment decisions.

While hardware wallets and 2FA secure your assets, knowing where to invest is just as important. That’s where Token Metrics comes in—using AI-powered analysis to help you avoid scams, choose safe projects, and trade with confidence.

In crypto, you are your own bank—so take your security seriously. And with Token Metrics guiding your decisions, you can navigate this high-risk market safely and profitably.

Research

What Are Trading Fees and How Do They Work?

Token Metrics Team
8 min

If you’ve ever bought or sold cryptocurrency, you’ve likely noticed that exchanges charge trading fees. While these fees may seem small at first glance, they can add up significantly over time, especially for frequent traders.

Understanding how trading fees work is essential for maximizing your profits and choosing the right platform and strategy. In this guide, we’ll explain what trading fees are, how they’re calculated, the different types of fees, and how Token Metrics can help you minimize costs while optimizing your trades.

What Are Trading Fees?

Trading fees are charges imposed by cryptocurrency exchanges whenever you execute a trade—whether you’re buying, selling, or swapping digital assets.

  • Purpose:

    • They compensate exchanges for providing liquidity, security, and order-matching services.
    • They discourage spam orders that could overload the exchange.

Example:
If you buy $1,000 worth of Bitcoin with a 0.1% trading fee, you’ll pay $1 in fees for that transaction.

How Are Trading Fees Calculated?

Most crypto exchanges calculate fees based on:

  1. Trade Value (Percentage):

    • The most common model.
    • Fees are a percentage of the total trade amount (e.g., 0.1% per trade).

  2. Flat Fees:

    • Some platforms charge a fixed fee per trade, regardless of trade size.

  3. Tiered Fee Structures:

    • Frequent traders often benefit from lower fees when they reach certain monthly trading volumes.

Maker vs. Taker Fees

Many exchanges use a maker-taker model to incentivize liquidity:

  • Maker Fees:

    • You pay a lower fee (or sometimes nothing) when you add liquidity by placing a limit order that isn’t immediately matched.

  • Taker Fees:

    • You pay a higher fee when you remove liquidity by placing a market order that is filled instantly.

Example:
On Binance, makers might pay 0.08%, while takers pay 0.1%.

Types of Crypto Trading Fees

When trading crypto, you’ll encounter more than just trading fees:

1. Trading (Transaction) Fees

  • Charged when buying or selling crypto.
  • Often range from 0.05%–0.5% depending on the exchange.

2. Deposit Fees

  • Some exchanges charge when funding accounts via credit card, PayPal, or bank transfers.
  • Crypto deposits are typically free.

3. Withdrawal Fees

  • Charged when moving funds off the exchange.
  • Often fixed per withdrawal (e.g., 0.0005 BTC).

4. Network (Gas) Fees

  • Separate from exchange fees, paid to blockchain validators.
  • Ethereum and other networks can have high gas fees during peak demand.

Why Do Trading Fees Matter?

Even small fees can significantly impact your profits, especially if you trade often.

Example:

  • A day trader making 50 trades/month with a 0.1% fee per trade on $1,000 positions will pay $50/month in fees.
  • Over a year, that’s $600 lost to fees—before considering withdrawal or gas costs.

This is why reducing fees is crucial for active traders.

How to Minimize Trading Fees

1. Use Low-Fee Exchanges

Compare platforms—Binance, Bybit, and Kraken often offer competitive rates for high-volume traders.

2. Increase Your Trading Volume

Many exchanges lower fees as your monthly trading volume increases.

3. Use Limit Orders

Save on fees by acting as a maker instead of a taker whenever possible.

4. Pay with Exchange Tokens

Some exchanges offer discounts when fees are paid with their native token (e.g., BNB on Binance).

5. Optimize Your Trading Strategy with AI

Instead of making dozens of small trades, use data-driven insights from Token Metrics to make high-probability trades—reducing overall fee impact.

How Token Metrics Helps You Save on Fees

Token Metrics isn’t an exchange—it’s an AI-powered crypto research and trading platform designed to maximize your profits.

Here’s how it helps with trading fees:

1. AI-Powered Trade Optimization

Token Metrics provides bullish/bearish trading signals based on 80+ technical indicators, helping you enter fewer but higher-quality trades—minimizing unnecessary fees.

2. Trader & Investor Grades

Our proprietary grading system helps you identify top-performing cryptos, reducing guesswork and avoiding costly trial-and-error trading.

3. AI-Managed Indices

Instead of manually rebalancing portfolios (and paying multiple trading fees), use Token Metrics AI-driven crypto indices, which rebalance intelligently while keeping transaction costs low.

4. Narrative Tracking

Our AI detects emerging crypto narratives early, helping you position yourself before the market gets crowded—reducing the need for excessive short-term trading.

Practical Example: Using Token Metrics to Reduce Fees

Imagine you’re trading altcoins manually and make 20 trades/month.

  • At 0.2% per trade on $1,000 positions, you pay $40/month in fees.
  • With Token Metrics AI signals, you cut this down to 8 high-probability trades per month—reducing your fees by 60% while increasing win rates.

This is how data-driven trading saves both money and stress.

Final Thoughts

So, what are trading fees and how do they work? They’re the charges exchanges take for facilitating trades, withdrawals, and transactions—and while they may seem small, they can eat into your profits quickly.

The good news? You can minimize trading fees with the right strategies—and Token Metrics can help.

By providing AI-powered trading signals, long-term Investor Grades, and automated crypto indices, Token Metrics helps you reduce unnecessary trades, make smarter decisions, and maximize your returns—all while minimizing the impact of trading fees.

Whether you’re a beginner or advanced trader, using Token Metrics means trading smarter, not harder.

Research

Should I Use Leverage When Trading Crypto?

Token Metrics Team
8 min

Leverage trading has become a hot topic in the crypto world. Many traders are attracted by the promise of amplified profits—but fail to realize it also magnifies losses. If you’ve been wondering, “Should I use leverage when trading crypto?” the short answer is: only if you fully understand the risks and have a solid strategy.

In this guide, we’ll break down what leverage trading is, how it works, its pros and cons, and how AI-powered tools like Token Metrics can help you make smarter decisions when trading with leverage.

What Is Leverage Trading in Crypto?

Leverage trading lets you borrow funds from an exchange to increase your position size, allowing you to control more capital than you actually own.

For example:

  • If you have $1,000 and use 10x leverage, you’re trading with $10,000.
  • A 10% price increase can give you a 100% profit on your original investment.
  • But a 10% price drop could wipe out your position completely.

Popular platforms like Binance, Bybit, and OKX offer leverage levels from 2x to 125x for certain assets.

Pros of Leverage Trading

Leverage isn’t all bad. When used responsibly, it offers several benefits:

1. Higher Profit Potential

Even small price movements can generate significant returns when using leverage.

2. Portfolio Efficiency

Traders can free up capital for other positions while maintaining large exposure in a leveraged trade.

3. Opportunities in Bear Markets

Leverage allows for short selling, enabling you to profit when prices go down.

Cons of Leverage Trading

The same factors that make leverage attractive also make it high-risk:

1. Amplified Losses

Just as leverage magnifies profits, it magnifies losses. A minor price drop could liquidate your entire position.

2. Liquidation Risk

When your collateral falls below a certain threshold, the exchange automatically closes your position, locking in your losses.

3. Emotional Stress

Leverage trading is fast-paced and stressful, often leading to panic selling or revenge trading after losses.

Should Beginners Use Leverage?

No.
If you’re new to trading, avoid leverage until you have:

  • A proven strategy with consistent results in spot trading.
  • Strong risk management skills (e.g., using stop-loss orders).
  • The ability to stay disciplined under pressure.

For beginners, leveraged trading can be a fast track to losing your capital.

When Does It Make Sense to Use Leverage?

For experienced traders, leverage can make sense when:

  • You’re hedging your portfolio against downside risk.
  • You have high conviction in a trade and want to maximize gains.
  • You’re trading high-liquidity assets like BTC or ETH with well-defined stop-losses.

How Token Metrics Helps You Trade Smarter with Leverage

Leverage trading requires precision, and that’s where Token Metrics gives you an edge.

1. AI-Powered Bullish & Bearish Signals

Identify high-probability trades with real-time AI signals based on 80+ technical indicators. This helps you avoid entering positions blindly.

2. Trader & Investor Grades

Use Trader Grades for short-term trading opportunities and Investor Grades for long-term positions—helping you decide when to scale up or reduce leverage.

3. Risk Assessment Tools

Token Metrics evaluates crypto projects and market trends to reduce exposure to high-risk assets—a must for leveraged positions.

4. AI-Driven Indices

Don’t want to trade manually? Use our AI-managed crypto indices to gain diversified exposure without taking unnecessary leveraged risks.

5. Narrative Detection

Our AI identifies emerging narratives before they hit mainstream attention, giving you a strategic edge in timing trades—crucial when using leverage.

Best Practices for Using Leverage in Crypto

If you decide to use leverage, follow these rules:

  1. Start Small: Use low leverage (2x–3x) instead of going all in at 20x or 50x.
  2. Set Stop-Loss Orders: Always predetermine your maximum loss tolerance.
  3. Trade Liquid Assets: Stick to high-volume coins like BTC and ETH to avoid slippage.
  4. Don’t Overtrade: Only use leverage on trades with strong conviction and proper analysis.
  5. Use AI Tools: Let Token Metrics guide your entries and exits with data-driven insights.

Why Overleveraging Is Dangerous

Many traders lose money by overleveraging, which leads to:

  • Margin calls and forced liquidations.
  • Revenge trading, where losses push traders into reckless decisions.
  • Complete portfolio wipeouts from one bad trade.

Pro Tip: Only trade with leverage on funds you can afford to lose.

Final Thoughts

So, should you use leverage when trading crypto?

For beginners, the answer is no—focus on mastering spot trading first. For experienced traders, leverage can be a powerful tool when used with strict risk management and data-driven insights.

That’s where Token Metrics makes a difference. With AI-powered trading signals, real-time risk analysis, and narrative tracking, Token Metrics helps you trade smarter, reduce emotional mistakes, and optimize your leverage strategy.

Leverage can make you or break you—so don’t go in blind. Use Token Metrics to guide your trades and stay ahead of the market.

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