Rug Pull
By CoinGecko | Updated on Aug 12, 2021
In the English lexicon, to pull the rug out (from under someone) means to to suddenly take away important support (from someone). In the context of crypto and Decentralized Finance (DeFi), having been rug pulled means to have liquidity removed from a Decentralized Exchange (DEX) liquidity pool. This results in a sell death spiral as other liquidity provider, holder and traders panic at the loss of available liquidity for trading. Once liquidity has been drained, token holders are usually left with illiquid assets which may not be tradeable anywhere else. It is worth noting that many projects have taken measures to alleviate rug pulling risks by committing certain level of liquidity in a way that can't be removed (ie, LP Token Burn, Liquidity Locking contract..etc). However, it does not fully eliminate rug pulling risks and market participants should conduct due diligence prior to trading.
Related Terms
Cryptocurrency Act of 2020
The Cryptocurrency Act of 2020 is a bill which aims to clarify which federal agencies would regulate which type of crypto assets.
Bagholder
A person who is holding a large quantity of cryptocurrency which is declining in value or becoming worthless
Fear, Uncertainty and Doubt (FUD)
A strategy to dissuade people from buying a particular cryptocurrency by spreading false information
Privacy Coins
Cryptocurrencies that are designed with transaction anonimity and user privacy in mind.
Hungry for more knowledge?
Back to Glossary or Subscribe to our newsletter.