What Is a Crypto Rug Pull?

A crypto rug pull occurs when developers introduce a token or other cryptocurrency asset and generate investor interest. They wait until investors purchase the token and then, without warning, disappear with the investors’ funds.

This type of scam usually takes place over a short period to minimize the chances of investors and industry analysts taking a closer look and realizing that the project was simply a scam with no real underlying value. 

The term comes from the phrase “to pull the rug out,” which refers to a sudden action that shocks someone and causes them to lose balance. The idiom captures the developers’ abrupt disappearance after draining a project of investors’ funds.

The term “rug pull” dates back to the 20th century. The idea is that someone standing on a rug will fall to the floor and potentially get hurt if the rug is suddenly pulled away. It describes what happens when a person’s dreams, plans, or hopes are suddenly shattered.

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