The Crypto market is decentralized, there is not a single governing body that decides the rules. As a result, the market is more prone to manipulations.
Manipulation can occur in different senses. Recently in the stock market, GameStop was manipulated through the help of social media such as Reddit and Twitter. After it happened the price surged about 1500%. Not everyone was happy with this development as people with short positions lost a lot of money in the market.
Similar experiences has been seen after Elon tweets regarding certain coins that rallied to give a huge amount of returns to the investors. Dogecoin rallied and achieved a price of almost $0.7 before the crash. Many other coins have showed similar reactions to certain actions made by popular and influential people.
Rug Pulls and DEXs
A lot of coins have been subjected to manipulation with the help of FUDs, news, influential people. Coins have been rug pulled. The act of rug pulling is the one in which developers and certain people with a huge amount of those assets sale every asset they have in the market eventually dropping the price down to the bottom. They abandon the project and run away with the investors’ funds.
They create its hype around different social media accounts such as Telegram, Twitter or Reddit. This helps to get as many people as they can to invest in their scheme. Once a number of people have invested in it, the developers withdraw everything from the liquidity pool eventually driving the price of the coin back to zero.
This kind of behavior has been observed a lot in DEXs where people list new tokens and then pair it with leading currencies like Ethereum.
Rug pulls are very common on such decentralized exchanges where the tokens are listed without audit and investigations as compared to centralized exchanges which thoroughly look into the project.
Another possible rug pull is a coin that has its price doing massive numbers in a few hours or even minutes. For example, a rug pull coin can move from 0 to 50X within a single day. When retailers see this they FOMO in and as a result are caught in the damage when the rug pull happens
