The Behind the Scenes of MemeCoin Speculation: An In-Depth Analysis of Rug Pulls and Scammers' Tactics

In the world of cryptocurrencies, there is a widespread illusion that MemeCoins can deliver hundredfold or thousandfold returns overnight. However, behind their glamorous appearance lies a sophisticated scam scheme. The rise of the Solana-based MemeCoin creation platform “PumpFun” has led to a sharp increase in rug pull scams, with investors falling victim one after another.

Explosive Growth of PumpFun and the Dangerous Reality

Launched in January 2024, PumpFun quickly gained popularity as a platform where users can create and trade MemeCoins with just a few clicks. It has generated nearly $63 million in revenue over the past 7 days, surpassing established projects like Aave and MakerDAO in scale.

Currently, about 1.88 million MemeCoins are listed on the platform, with over 40,000 active users speculating daily. However, there is a shocking statistic: only about 1.4%, or roughly $60,000 in market cap, of these MemeCoins are listed on the Solana DEX “Raydium.”

The tragic background behind this is even more severe. In the MemeCoin sector, over 80% of traders are experiencing losses, and most MemeCoins on PumpFun are inevitably facing the fate of rug pulls.

The Deceptive Soft Pull Scheme: The Full Scope of the Clever Tactics

Stage 1: Initiating Price Manipulation through Fake Trades

Scammers first prepare multiple wallet addresses. These addresses may appear unrelated at first glance, but are actually controlled by the same person. To hide the flow of funds, they utilize anonymization tools like Elusiv (a privacy protocol on Solana), making the real identities of transaction participants untraceable.

What’s more clever is that these wallets seem to function as genuine buyers and sellers. Even with on-chain analysis tools like Bubblemaps, detecting direct links is extremely difficult. However, scammers control the token supply through these multiple wallets, enabling more effective price manipulation.

Stage 2: Creating False Demand and Inflating Value

In the next phase of rug pulls, scammers generate new trading volume to rapidly increase the MemeCoin’s price. Once the market cap reaches a certain level, they flood social media with advertisements and pay influencers to promote the coin.

Simultaneously, by continuing to manipulate trading volume, they feature the MemeCoin prominently on platforms like DEX Screener’s “Trending” section. The goal is simple: to make more people notice the token and trigger FOMO (Fear Of Missing Out).

Stage 3: Executing the Rug Pull and Securing Profits

When sufficient liquidity has accumulated and the funds exceed the costs of promotion and fake trades, scammers make their final move—the “soft pull.”

They sell off the entire supply of tokens from multiple wallets they control, then escape with the funds. During this process, they often gradually withdraw liquidity to avoid resistance, making it harder for others to detect the scam.

Who Profits from This Scam Scheme?

Throughout the entire process, only three types of individuals actually profit:

1. Scammers themselves: Those who control multiple wallets and lead the price manipulation from start to finish
2. Influencers: Those who receive rewards from scammers and promote the scam
3. Lucky early investors: A few traders who manage to take profits before the soft pull occurs

Most other investors become victims of rug pulls.

Practical Guide to Protect Yourself from Rug Pull Scams

1. Conduct Thorough Research

Investing in MemeCoins requires prior research. Carefully investigate the market and project status before taking a position to avoid falling prey to FOMO.

Opportunities are always present in this market, but true success demands effective thinking and patience. It’s crucial to develop your own judgment criteria rather than blindly following others’ words.

2. Start with Small Positions to Gain Practical Experience

Don’t expect your life to change with a single trade. Nor is it wise to blindly copy stories of overnight success.

When participating in MemeCoin trading, it is strongly recommended to start with small positions, about 10% of your total assets. From there, learn others’ strategies through community, platforms, and books, and build your own methodology through actual trading.

Learning through practice requires continuous recording, reflection, and review. This process sharpens your ability to read market movements and enhances your capacity to track smart money (institutional investors and savvy individual investors).

3. Enforce Strict Risk Management and Position Allocation

The fundamental principles of investing are clear: opportunities and risks coexist. Ignoring risks while chasing opportunities leads to ruin.

For most investors, two basic rules are essential:

• Protect your principal: Only trade with funds you can afford to lose
• Avoid unfamiliar instruments: Steer clear of complex mechanisms and opaque projects

Especially in MemeCoin trading, if you are not prepared to lose all your funds, you should not participate.

Conclusion: Knowledge Is the Best Defense

Rug pull scams are becoming more sophisticated with technological advancements. However, understanding their tactics and implementing proper risk management can significantly help in avoiding losses.

While MemeCoins offer the potential for high returns, they also carry the risk of losing all your assets. Do not be deceived by market illusions; establish your own investment philosophy through calm judgment and continuous learning, which is the only path to long-term success.

The cryptocurrency field is a highly risky market. Exercise caution and responsibility, and act based on your own judgment.