Meme Coin Trading: Tips to Avoid Rug Pull for Beginners

Bittime - Trading Meme Coin: Tips to Avoid Rug Pull for Beginners. With the promise of big profits in a short period of time, meme coins like Dogecoin and Shiba Inu attract a lot of interest, especially beginners who are interested in “getting rich quick”.

The Potential Rug Pull of Meme Coin

However, behind this profit potential, there are major risks, one of which is rug pull- a scam perpetrated by developers to extract money from investors.

This article discusses how to avoid rug pulls in meme coin trading, providing you with guidelines to protect yourself from this high risk crypto investment.

This article is also heavily inspired by Angga Andinata's video The Case Against Meme Supercycle

What is Meme Coin and Why is it Risky?

Meme coins are a type of crypto that are based on community hype and often lack utility or strong fundamental support.

Unlike Bitcoin which is considered a store of value or altcoins that support various business models on the Web3, meme coins are purely dependent on trends and community support.

This makes the price fluctuate very easily, and in some cases, meme coin creators do a rug pull- selling all the coins they have after the price spikes, leaving investors with huge losses.

Also read 7 AI Meme Coins with Low Capitalization, Successor to $GOAT?

Tips to Avoid Rug Pull in Meme Coin Trading

If you are interested in trying meme coins, pay attention to the following tips to avoid getting caught in a rug pull or other fraudulent schemes:

1. Check the Coin Launch Method (Fair Launch vs Private Sale)

A fair launch is one of the most transparent launch methods, where everyone has an equal opportunity to buy the coin from the start.

Fairly launched coins tend to be more secure than those launched through private sale where most of the tokens are sold first to large investors at a cheaper price.

In a fair launch, the community has greater control, and token distribution is more even, minimizing the risk of price manipulation.

2. Beware of Hype and Temporary Trends

Meme coins rely heavily on hype and attention, which means that when the trend goes down, the price will also fall dramatically.

Pay attention to the narrative-is the meme coin connected to a particular issue, such as politics or pop culture?

In many cases, the attention on these coins is short-lived, so you should be prepared for the risk of extreme fluctuations.

Avoid buying meme coins based on momentary hype and make sure to understand the right time to enter and exit.

3. Beware of Confirmation Bias and Bandwagon Effect

One of the main reasons many novice investors get caught in rug pulls is confirmation bias and the bandwagon effect.

Confirmation bias makes investors tend to only look for information that supports their decision to buy, without considering risks or different opinions.

Meanwhile, the bandwagon effect occurs when a person follows the actions of the majority simply because many people are doing it.

Don't be easily swayed by information from social media or communities without careful research.

4. Learn the Tokenomics Structure and Supply

Tokenomics or token economic structure is one of the things to consider when choosing a meme coin.

Make sure you understand the total coin supply, token distribution, and lock-up or vesting system applied to the coin.

Coins that have unlimited supply and many unvested tokens are more prone to drastic price drops, as the ever-increasing supply can cause inflation in the crypto ecosystem.

5. Avoid Meme Coins that are Based on Gambling Mindset

Meme coins often appeal to those with a “get rich quick” mentality, which is high-risk and unsustainable in the long run. Investors hoping to benefit from hype and speculation are usually more exposed to the risk of rug pull.

In contrast, a rational and research-based approach can help mitigate losses.

For example, meme coins should only be a small addition to your portfolio, not your entire investment strategy.

Read also The Meme Coin Trend is Getting Rampant, Here are 4 Potential Meme Coin Categories!

Conclusion: Be Careful in Meme Coin Investing

Meme coins may offer the potential for quick profits, but the risk of rug pulls and high volatility make them very risky for investors, especially beginners.

By understanding the launch method, avoiding the hype, and doing adequate research, you can reduce the risk of getting caught in a rug pull.

Remember, Bitcoin and altcoins serve as more stable and secure assets in the long run, while meme coins are more suitable for entertainment-based investments with funds you are willing to lose.

Make your investment decisions wisely and don't get caught up in the hype.

With these guidelines in mind, you'll be better prepared for the challenging and dramatic world of meme coins.

How to Buy Crypto on Bittime

Want to trade sell buy Bitcoins and crypto investment easily? Bittime is here to help! As an Indonesian crypto exchange officially registered with Bappebti, Bittime ensures every transaction is safe and fast.

Start with registration and identity verification, then make a minimum deposit of IDR 10,000. After that, you can immediately buy your favorite digital assets!

Check the exchange rate BTC to IDR, ETH to IDR, SOL to IDR and other crypto assets to find out today's crypto market trends in real-time on Bittime.