A recent report from Chainalysis revealed that rug pull is one of the latest innovations of crypto scamming in 2021, which accounts for 37 percent of all cryptocurrency scams in 2021 compared to 1 percent reported in 2020. According to the report, in 2021 rug pulls took over $2.8 billion worth of cryptocurrency from victims.
What is a rug pull in crypto?
A rug pull in the crypto space is when an individual or group of people develop a crypto project and lure people into investing in that project with a series of bogus promises, only to pull out all their investments with profits after a few rallies since they are generally the largest holders in the project. With top investors out, smaller investors will struggle to make money or be forced to abandon their investments with no end in sight.
These tend to be low-effort projects created by a few individuals with the goal of fleecing unsuspecting investors. It is most commonly mentioned when a token’s team removes liquidity.
A typical rug pull project is “Squid Game Token” named after the Netflix drama “Squid Game”. The squid game token surged from an All-Time-Low of $0.0007926 on the 1st of November 2021 to $2,861 per token in the same month. The token is currently trading at $0.105 per coin.
The report, however, noted that rug pulls are mostly seen in DeFi projects where developers create and promote new tokens to investors with the hope that the new token will rise in value because developers can easily create cheap tokens on the ethereum blockchain and get them listed on decentralized exchanges without code audit.
Senator Elizabeth Warren, an active critic of cryptocurrency, called DeFi “one of the shadiest parts of the crypto world”.
She said, “stablecoins pose risks to consumers & to our economy. They’re propping up one of the shadiest parts of the crypto world, DeFi, where consumers are least protected from getting scammed. Our regulators need to get serious about clamping down before it is too late.”
The chart below shows 2021’s top 15 rug pulls in order of value stolen.
Thodex was the biggest rug pull of the year, a Turkish centralized exchange whose CEO disappeared after the exchange suspend its users from withdrawing their funds on the platform. This represents almost 90 percent of all investment scams through rug pull, seeing users lose over $2 billion worth of cryptocurrency. In all, rug pulls took in more than $2.8 billion worth of cryptocurrency from victims in 2021.
Chainalysis report further revealed that scams involving digital coins are the largest form of cryptocurrency-based crime by transaction volume, with over $7.7 billion worth of cryptocurrency taken from victims worldwide.
Crypto unregulated market makes investors susceptible to scams, and this might deter the successful adoption of cryptocurrency.
$430 Million Worth of Bitcoin Traded Amidst CBN’s Restrictions
Paxful has said it has 1.5 million cryptocurrency traders/investors in Nigeria despite the Central Bank of Nigeria (CBN) restrictions.
Paxful, one of the major peer-to-peer (P2P) cryptocurrency exchange platforms in the world with a strong presence in Nigeria and Africa as a whole, has said it has 1.5 million cryptocurrency traders/investors in Nigeria despite the Central Bank of Nigeria (CBN) restrictions.
According to the exchange platform, Nigerians have traded over $1.5 billion in cryptocurrency volume on the platform up until 2021. This, the company said Bitcoin accounted for $420 million, adding that the number jumped by 23% between February 2021 and March 2021. Just after the CBN restricted banks from facilitating cryptocurrency payments for traders and investors in Nigeria.
Last year February, the central bank of Nigeria made a statement saying “Further to earlier regulatory directives on the subject, the bank hereby wishes to remind regulated institutions that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchange is prohibited.”
However, Paxful revealed that;
“Nigeria is leading in cryptocurrency, and we expect this growth to only continue. To share some stats:
- Nigeria is our largest market, with 1.5 million users and over $1.5 billion volume to date (since 2015)
- Compared to last year – we are on pace to have 23% more bank transfer trades in Nigeria on the platform than last year
- Compared to last year – we are on pace to have 36% more bank transfer volume in Nigeria on the platform than last year
- Looking at YoY data from end of June 2020/2021, we see increases in Bitcoin trading volumes of 57% in Nigeria
- Looking at YoY data from end of June 2020/2021, we see increases in user numbers of 83% in Nigeria
- To date, in 2021, we’ve seen over $430M in USD traded in BTC alone in Nigeria
- From Feb 2021 to March 2021 (after CBN restrictions were placed), trade volume increased over 23% on Paxful in Nigeria
- As of April 2021, Bitcoin P2P trading in Nigeria has surged by 27% since restrictions were introduced by CBN”
Asides from Paxful, there are other P2P platforms that focus on buying and selling bitcoins and other digital currencies in Nigeria.
Binance, Bybit, Kucoin, etc are some of the known cryptocurrency exchange platforms in Nigeria, one of the largest participating nations. However, there are no available figures to authenticate their transaction volume or value like Paxful.
Since the CBN restricted banks from dealing in cryptocurrencies, Nigerians now rely on P2P platforms like Paxful, Binance and others for their cryptocurrency transactions.
Cryptocurrency Crash: It’s Not All Doom and Gloom
Research into cryptocurrency capital inflows has shown that about $140 billion is sitting in four of the leading stablecoins.
Despite the cryptocurrency crash and rising global uncertainty, research into cryptocurrency capital inflows has shown that about $140 billion is sitting in four of the leading stablecoins as institutional investors that have been backing the cryptocurrency space in recent months assess happenings.
Capital inflow into dollar-pegged Tether’s USDT, Circle’s USDC, Binance’s BUSD, and MarkerDAO’s DAI has risen from $7 billion in the last 2 years to $147 billion in 2022, suggesting that cryptocurrency investors are not withdrawing their funds or converting to U.S. Dollar but sitting on the sideline for possible re-entry.
“The amount of money sitting on the digital sideline has never been greater and points to an abundance of patient investors ready to pounce on discounted digital assets,” Stated Digital Asset Investment Management (DAIM) analysts. “That means the ecosystem has an additional $140 billion ready to be deployed into bitcoin and altcoins.”
According to Louis Schoeman, managing director at broker comparison site Forex Suggest, we are currently experiencing the biggest crypto crash in history, with the crypto Fear and Greed index having slipped into “extreme fear” category.
However, it’s not all doom and gloom. Coins such as Bitcoin, Ethereum and Solana gained in their prices in the last 24 hours. Equity markets, too, recorded some gains including Nasdaq, the S&P 500 and Dow Jones Industrial Average.
“It’s worth noting that various coins including Bitcoin were heavily inflated in a bubble over the last 2 years, so a crash of this enormity was bound to happen. With investors dumping assets in response to high inflation and the semi-collapse of the Celsius network driving the downward spiral, I think only the best fundamentally strong crypto projects will survive this bear market, as is proving to be.
This is a cleansing process of note as we believe between 80% – 90% of the crypto projects will not survive this period especially if Bitcoin falls below $20,000 again.
But, it also serves as a massive opportunity for many no-coiners to enter the crypto market for the 1st time ever.
Fortune favours the brave in crypto right now.”
Binance, the World’s Largest Cryptocurrency Exchange, is 5 Years Old Today
Binance, the world’s leading blockchain ecosystem and cryptocurrency infrastructure provider, is celebrating its 5th anniversary by eliminating trading fees on a wide range of bitcoin spot trading pairs.
Binance, the world’s leading blockchain ecosystem and cryptocurrency infrastructure provider, is celebrating its 5th anniversary by eliminating trading fees on a wide range of bitcoin spot trading pairs. While Binance has long maintained one of the lowest spot trading fees in the industry, it is establishing itself as the global leader in pricing with this latest move.
From July 8, users will be able to enjoy fee-free trading on thirteen stablecoin and fiat combinations including BTC/USDT, BTC/BUSD, BTC/USDC, BTC/EUR, BTC/TRY, and more. The new trading fees will be in effect until further notice, allowing Binance users globally to enjoy the fee-free feeling beyond the two weeks of anniversary celebrations.
Binance Founder and CEO “CZ” (Changpeng Zhao) said: “In line with our user-first philosophy, Binance has always strived to provide the most competitive fees in the industry. At its core, Binance is an inclusive platform with accessibility in mind. Eliminating the trading fees on selected BTC spot trading pairs is another move towards that direction.”
“Within the span of five years, Binance has amassed an amazing community that believes in us and supports our vision. Our growth and achievements would not have been possible without them. We hope to give back to the community by providing them with the world’s best products and services,” added CZ.
Binance launched in July 2017 as a crypto-to-crypto exchange and within six months, became the world’s largest crypto exchange. Today, Binance is a global blockchain ecosystem spanning across trading services, infrastructure solutions, educational resources, research, social good and charitable programs, investment and incubation initiatives, and more. By providing access to broad financial tools while maintaining one of the lowest fees in the business, Binance is making crypto accessible to everyone in Africa and beyond.
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