Cryptocurrency: What is a "rug pull"?

Cryptocurrency is a high-risk investment which can yield big results, but can also lead to crushing losses. Extreme price volitility and a lack of central regulation are factors to bear in mind if you choose to invest. However, the lack of regulation and lure of quick money naturally leads to some taking advantage of hopeful investors, with one of the pitfalls being falling victim to a rug pull.

Put simply, a rug pull is an exit scam where a new cryptocurrency is hyped up to cause people to invest before it launches. The currency is then abandoned, the creators drain the funds of the investments made by others and vanis into this air, leaving hopeful investors with nothing. The cryptocurrencies are sometimes hyped using celebrities, such as in the case of Haliey Welch, who soared in popularity in 2024 due to her "hawk tuah" meme - her $HAWK digital coin hit a $490 million market cap in December 2024 before losing 95% of its value within minutes. Investors cried foul, blames Welch for misleading them, her reputation was ruined and she has barely been seen online since. Other so-called memecoins can step from popular culture like the hit TV show Squid Game - in 2021 a cryptocurrency was launched based on the South Korean Netflix show with the price rising from 1 cent to close to $3,000 in less than a week, then plummeting again. The developers who sold their coins at the price peak made off with more than $3 million, leaving other investors who were unable to cash out with nothing.

Critics of the Squid Game rug pull argued that the warning signs were there - the website contained spelling and grammatical errors, but these were possibly overlooked by fans of the show and potential investors who thought this may be an easy way to make money fast - and it was, just not for them.

Even the President of the United States has gotten involved, with his $TRUMP coin reaching a value of $15 billion in January 2025 before dropping by 97% in July 2026. While a million investors have lost money, Donald Trump pocketed $635 million in royalties, leading one veteran investor to declare it a rug pull.

As with all investments, the advice is to do thorough and extensive research before choosing to part with your money. With cryptocurrencies, the risk of losing everything is higher than traditional stock market trading. If you are still interested in cryptocurrency investments and want more information on how to avoid falling victim, click here.