In the context of cryptoCrypto is a digital asset and medium of exchange employing cryptography to secure transactions, control the creation of new units,... Read More and Decentralized Finance (DeFi)Decentralized Finance (Defi) refers to the movement of building decentralized financial applications that have no central authority and are censorship-free.... Read More, having been rug pulled means to have liquidityLiquidity is a measure of the degree to which an asset or security can be quickly bought or sold in... Read More removed from a Decentralized Exchange (DEX)Decentralized exchanges facilitate the trade of cryptocurrencies or other digital assets without a central authority. Decentralized exchanges are often peer-to-peer,... Read More liquidity poolLiquidity pools are shared pools of assets that are readily available for trading on a decentralized exchange. To form a... Read More. This results in a sell death spiral as other liquidity providers, tokenTokens and Coins are often erroneously regarded as interchangeable terms. However, while both Tokens and Coins share technical similarity, tokens... Read More holders 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 a certain level of liquidity in a way that can’t be removed (eg: LP Token BurnA token burn event refers to when an amount of tokens are removed from the circulating supply. This is done... Read More, Liquidity Locking contract..etc.). However, it does not fully eliminate rug pulling risks and market participants should conduct due diligence prior to trading.
