Get started with Bybit trading competition at ease & never miss out on any opportunities to win bonuses and rewards!

The benefits you gain from joining trading competitions are boundless. You can make money, hone your trading skills, explore untried strategies and so much more. Bybit hosts a plethora of trading competitions, from small but frequent product-specific competitions held once a month or bimonthly to annual grand events like the 

 (WSOT) competition. These contests are a perfect avenue to help you reap profits, regardless of the market condition. 

With so many types of competitions, you may need more clarification on what types you’re eligible to join and what kind of rewards you can gain from them. With this handy guide, you’ll wonder no more as we break down the nitty-gritty of participating in Bybit's trading competitions.

With all its varying products, Bybit has many different kinds of competitions, ranging from 

. Regardless of the type of competition, participants are usually ranked on the leaderboard based on either profit and loss (P&L, or PnL) ratio or trading volume. 

P&L refers to the total amount of revenue and costs of your trading throughout the competition. Hence, when you compete to rank for P&L, you're competing to show how profitable you are.

P&L (%) = (Profit / Initial Equity + Total Deposits) * 100%

If you have the same P&L% as another participant, your total trading volume will then determine your ranking.

Trading volume measures the total number of contracts or crypto traded during the competition. If you achieve the same trading volume as another competitor, you’ll then be ranked based on the time you took to reach that trading volume. 

Benefits of Joining a Crypto Trading Competition

Participating in a crypto trading competition offers numerous benefits to uplift your trading journey. These competitions bring exciting rewards that can increase your gains during a bull market, or offset your losses and reignite your motivation to seek financial gains during a bear market. Moreover, the experience gained from live trading is invaluable, surpassing theoretical knowledge. Competitions provide real-life insights, opening your eyes to new opportunities.

Competing also inspires you to explore innovative trading strategies, going beyond your comfort zone and potentially yielding astounding gains. Comparing your performance with other traders on a level playing field allows you to gauge your abilities and even earn coveted bragging rights if you emerge victorious.

Please be aware of several registration criteria, as they’ll affect your eligibility to join the competitions.

Depending upon the specific competition, the registration criteria will look at the amount of net assets or net equity you have in your Bybit account. But what’s the difference between net assets and net equity? Net assets are your total assets minus your liabilities, and include unrealized gains and losses, whereas net equity excludes unrealized gains and losses.

Besides net assets and net equity, other elements also come to play in influencing your eligibility to join a competition. For instance, a single user shouldn’t have more than one account. If you create multiple accounts to join competitions on Bybit, you’ll be considered a fraud and will consequently be disqualified. Furthermore, you can only participate in one competition within the same time frame, except for grand-scale competitions like WSOT and Copy Trading Fiesta that hold several events within one competition. In such cases, you’ll be able to participate in more than one event simultaneously.

While you may only open one main Bybit account, you can open up to 20 

 connected to your main account, while four Subaccounts can be used to link to your Main Account for competitions. With Subaccounts, you can now join multiple competitions simultaneously to maximize your rewards.

Similarly, Market Makers and Pro users are prohibited from joining Bybit competitions, as they’re typically institutional traders who can make use of their high trading volumes to gain an edge in the competitions.

While most Bybit competitions only specify net assets or net equity as their registration criteria, certain competitions also require a referral link or code on top of the minimum net assets or net equity amount. Through joining such competitions, you can also expect exclusive rewards not found in other competitions.

Speaking of rewards, Bybit generally offers two types of rewards for its competitions: the prize pool and lucky draw. It’s important first to ensure you’re eligible for rewards, especially for P&L-ranked competitions. Even if the competition is ranked by P&L, you’ll still need to hit a minimum specified trading volume before you qualify for rewards. For example, the 

 held in September 2024 required participants to reach a derivatives trading volume of at least $10,000,000 before they could earn any rewards.

The main reward base for Bybit competitions is the prize pool. The prize pools can consist of hundreds of thousands of USDT, or even millions of USDT, depending on the scale of the competition. For large-scale competitions like WSOT and Copy Trading Fiesta, participants can enter several events under these competitions and obtain more rewards. 

It's good to embrace a positive and encouraging mindset as you participate in trading competitions. Observe and learn from the strategies employed by other contestants to refine your own trading plan. By analyzing their moves, you can gain valuable insights and give yourself a competitive edge. Remember, however, that it's also essential to think critically and avoid blindly copying others.

Always analyze your own performance and adjust your strategy accordingly, even in short-term competitions. Also, stay informed about market events and developments that can impact your performance, as this knowledge will maximize your chances of success. With the right mindset and strategic approach, you can excel in trading competitions.

Bybit is actively organizing trading competitions to provide users with a chance to maximize rewards. 

The TradeMasters Grand Prix trading competition and the World Series of Trading (WSOT) are among the biggest annual competitions on Bybit.

TradeMasters Grand Prix Trading Competition

Bybit’s TradeMasters Grand Prix trading competition is a year-long series of derivatives trading contests with a prize pool of 10,000,000 USDT. This year, it opens its first series with a prize pool of 1,000,000 USDT. The competition runs from Feb 18, 2025, 10AM UTC to Mar 11, 2025, 10AM UTC, with registration held between Feb 11, 2025, 10AM UTC and Mar 6, 2025, 10AM UTC. 

You’ll need to hold at least 5,000 USDT worth of crypto in your Bybit account in order to participate and be eligible for rewards, and you’ll be ranked based on either your trading volume or your PnL%. If you reach a trading volume of over $6 million, using specific tools like the 

, you’ll unlock an extra 50,000 USDT prize pool. 

Additionally, if you become a Bybit VIP during the competition period,, you’ll enjoy an exclusive welcome bonus of up to 800 USDT.

Launched in 2020, Bybit’s World Series of Trading (WSOT) has grown continually. In 2024, WSOT broke records with an all-time high of $100 billion in trading volume and over $137 million in profits for its participants. 

 offered a grand prize pool of 10,000,000 USDT and consisted of several trading competitions. 

 competition featured a prize pool of 7,150,000 USDT, split into four reward categories: Squad PnL% Ranking, Regional Squad PnL% Ranking, Individual Profit and Individual Trading Volume. There were also side competitions like 

, open to both Master Traders and Followers, and 

 a vote-based competition whose voters shared in an 800,000 MNT prize pool by voting for a top ten–ranked web3 project. 

How do I know my rewards distribution status?

There will be a Bybit Announcement post regarding rewards distribution and dates.

You can only collect your rewards after a competition ends, with the waiting period ranging from one week to a month. A risk review will be conducted after each competition ends, after which the rewards will be given on the date specified in the announcement post. 

As highlighted above, creating multiple accounts to earn more rewards in competitions is considered fraudulent behavior and will lead to disqualification. Other fraudulent behaviors include 

, volume faking, market manipulation and more. Be sure to read the competition’s terms and conditions carefully to avoid getting disqualified. 

Now that you’ve learned about all the rankings, registration criteria and rewards in Bybit trading competitions, you might be eager to flex your muscles in some of them. But before you do, remember that it’s important to carefully pore over the terms and conditions to ensure you get properly reimbursed for your efforts.

We hope our tips will help your competition journey be a fun and fruitful one. May you enjoy the process and savor the sweetness of winning!

Beginner

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How to Join Bybit Trading Competitions (Ultimate Guide)

Our monthly report delves into insights from options volatility to inspire your next crypto move.

: In January 2025, Bitcoin (BTC) and Ethereum (ETH) faced significant weekend sell-offs driven by macroeconomic factors, including Donald Trump’s U.S. tariff policies, expectations of a strategic Bitcoin reserve and disruptions from AI competitors like DeepSeek.

: BTC and ETH reacted more quickly and sharply than traditional equities did to economic and geopolitical news as leading indicators for Monday market movements, similar to the earlier yen carry trade unwinding in August 2024.

: Ethereum consistently underperformed Bitcoin during market dips in January 2025. However, the options markets reflected a lower implied volatility premium for ETH than expected, based on recent volatility comparisons.

Please check out the report’s highlights.

Macro Factors Influencing Crypto Sentiment

In January 2025, the cryptocurrency market — particularly Bitcoin (BTC) and Ethereum (ETH) — experienced significant volatility largely driven by macroeconomic events. Key influences included U.S. president Donald Trump's unpredictable tariff policies and the emergence of artificial intelligence (AI) competitors such as DeepSeek, both of which created uncertainty in traditional and crypto markets. 

The turbulent sell-offs of BTC and ETH contrasted starkly with the relatively stable conditions observed during the Christmas 2024 period. This volatility was particularly evident on weekends, as crypto markets reacted more sharply to macroeconomic news than traditional equities, often serving as a leading indicator for market movements in the following week. For instance, the reaction to both subsequent labor market data and the hawkish tone from the Federal Reserve resulted in a notable sell-off of crypto assets before traditional markets opened.

Throughout January, a pattern emerged whereby the cryptocurrency market exhibited heightened volatility during weekend trading sessions, especially on Sundays. This trend was characterized by significant sell-offs that preceded the opening of traditional markets on Mondays. The chaotic environment was exacerbated by the launch of Trump-family meme coins and heightened expectations surrounding a strategic Bitcoin reserve, which led to rapid price fluctuations in crypto assets. 

Despite the initial bullish sentiment, these expectations were tempered by conflicting tariff reports, resulting in further volatility. This analysis highlights that the realized volatility — measured by 10-minute returns — spiked significantly during weekends, indicating that the crypto market is particularly sensitive to developments that unfold over the weekend.

Ethereum's Underperformance and Volatility Trends

January 2025 marked a challenging month for Ethereum, which consistently underperformed relative to Bitcoin during periods of market downturns. Despite ETH’s historical tendency to exhibit higher volatility than BTC, the options markets were pricing ETH’s implied volatility at a lower premium than its realized volatility. This discrepancy suggests that investors weren’t fully accounting for ETH’s increasing volatility in their market expectations. 

The emerging trends indicated a growing volatility premium for ETH as compared to BTC, with ETH exhibiting sharper price movements in both upward and downward directions. As January progressed, the divergence in performance between BTC and ETH underscored the unique dynamics within the crypto market, particularly as macroeconomic pressures continued to shape trader sentiment.

Events of January 2025 highlighted the intricate relationship between macroeconomic factors and cryptocurrency volatility. The sharp reactions of BTC and ETH to external events signify their role as leading indicators in the financial landscape, and the pronounced volatility during weekends and the distinct behavior of Ethereum relative to Bitcoin reflect an evolving market characterized by rapid changes and heightened sensitivity to external influences. As the landscape continues to shift, these trends will be critical for traders and investors navigating the complexities of the crypto market.

Advanced

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Bybit X Block Scholes Option Volatility Report (February 2025): January 2025 Marks New Start for Crypto, Shaped by Macro and Policies

The Central African Republic Meme (CAR) is a cryptocurrency launched by the nation's President Touadéra on his official X account.

On Feb 10, 2025, the Central African Republic (CAR) ventured into the cryptocurrency landscape by launching its own meme coin, aptly named the Central African Republic Meme (CAR). This initiative, announced by President Faustin-Archange Touadéra, aims to leverage the global appeal of meme coins to foster national unity and promote financial inclusion within its country.

Meme coin cryptocurrencies are inspired by internet memes, often characterized by humorous or satirical nature. While many of these crypto tokens start off as jokes, some gain significant traction and market value. 

, a subset of this trend, are digital assets associated with specific nations, aiming to promote national identity or causes through the viral nature of memes.

Several countries have experimented with cryptocurrencies, though most have focused on Bitcoin or central bank digital currencies (CBDCs) rather than meme coins. El Salvador, for example, made Bitcoin legal tender in 2021, using it as a way to attract foreign investment and integrate with the global digital economy.

What Is the Central African Republic Meme (CAR)?

The Central African Republic Meme (CAR) is a cryptocurrency launched by that nation's government on Feb 10, 2025. 

 by President Touadéra on his official X account, the coin represents an effort to harness the popularity of meme coins to benefit the country's economy and global standing.

The coin was positioned as a way to bring international attention to the Central African Republic, similar to the way that meme coins like Dogecoin and Shiba Inu have created strong online communities and generated billions of dollars in trading volume. The CAR government appears to be tapping into this trend not only to promote its own economy, but also in order to explore new avenues for digital financial inclusion.

The CAR meme coin is part of the country's broader strategy to support national development and promote financial inclusion. By 

 this digital asset, the country’s government aims to unite its citizens through a shared economic activity, potentially fostering national unity and engaging the populace in developmental projects.

The meme aspect of the coin could increase public engagement and awareness, similar to the way that Dogecoin was initially dismissed but later gained traction, due to its strong community and branding.

Another goal of the CAR coin is to serve as an experimental model for other nations considering digital assets as a tool for national development. If successful, this could inspire other countries — particularly those with limited access to traditional banking infrastructure — to adopt similar strategies.

Central African Republic Adopted Bitcoin as Legal Tender

This move into the cryptocurrency space isn’t the Central African Republic's first. In April 2022, 

 (after El Salvador) to adopt Bitcoin as legal tender. This decision marked a significant shift in the nation's financial landscape, aiming to open new opportunities for its citizens and integrate the country into the global digital economy. The adoption of Bitcoin was seen as a bold experiment, particularly for a country with limited internet access and financial infrastructure. 

CAR Market Performance and Trading Volume

 was trading at approximately $$0.031. The coin's market capitalization stood at around $31 million, with a 24-hour trading volume of approximately $31 million, indicating significant market interest and activity. However, like many meme coins, CAR has experienced high volatility, with its price reaching an all-time high of $0.7757 before declining by a staggering 96% to its current value.

Despite its ambitious goals, the CAR meme coin has faced several controversies. Allegations of deepfake usage in the announcement video by President Touadéra have raised questions about the authenticity of the launch. Concerns have also been raised about the security of the president’s social media accounts, with some speculating that the announcement may not have been made directly by him.

While the Central African Republic’s government has stated that the token supply was locked through Streamflow Finance, detailed emission schedules and distribution plans remain to be published. Meme coins in general are known for their speculative nature, and the risks associated with CAR are no different.

The Central African Republic's launch of the CAR meme coin represents a bold step into the world of digital assets, aiming to unite the country’s citizens and attract global attention. While the initiative holds potential for national development and financial inclusion, it also carries significant risks, including allegations of deepfake involvement, social media suspensions and questions surrounding the coin’s legitimacy.

As with all meme coins, volatility is high, and while early trading volumes suggest strong interest, the long-term success of CAR remains uncertain. Whether this will be a groundbreaking experiment in digital finance or another short-lived meme coin frenzy depends upon market sentiment — and how the project develops in the coming months.

Intermediate

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Central African Republic Meme (CAR): Central African Republic Launches Meme Coin

Bybit Web3's Airdrop Arcade serves as a streamlined and user-friendly aggregation platform for accessing promising crypto airdrops. Learn how to claim airdrops!

In the dynamic landscape of cryptocurrency, 

 represent exciting opportunities to acquire valuable digital assets at no up-front cost. However, navigating the vast array of available offerings and discerning legitimate projects can be overwhelming for both seasoned and new users. 

Bybit Web3 Airdrop Arcade picks the best projects most likely to help you win free crypto through airdrops, eliminating the stress of searching for promising projects. We’ll introduce some of its featured campaigns so you can take advantage of attractive airdrops.

Crypto airdrops are essentially distributions of a cryptocurrency's tokens or NFTs that are given away to users who have fulfilled the preset terms and conditions of the airdrop events. Airdrops usually function as a marketing strategy for new crypto or 

 projects, aiming to boost awareness, adoption and community engagement.

Distribution methods vary. For example: 

Crypto airdrops present exciting opportunities to explore the crypto landscape and potentially acquire valuable assets. However, there are still bad actors around. It’s crucial to conduct thorough research on projects and platforms that offer airdrops to mitigate risk exposure.

Crypto airdrop aggregators are services provided to help you discover and learn about any available airdrops, as they’re essentially free distributions of cryptocurrency tokens by new projects to generate interest and awareness. 

This allows users to quickly find airdrops relevant to their interests and risk tolerance.

Using an aggregator can save time and offer a wider range of options, but it's essential to approach airdrops with caution and conduct thorough research before participating.

Bybit Web3 Airdrop Arcade serves as a streamlined and user-friendly aggregation platform for accessing promising crypto airdrops. It empowers 

 holders to seamlessly participate at no cost in airdrops featuring valuable crypto assets.

Airdrop Arcade simplifies the discovery of valuable crypto airdrops and promising projects by aggregating numerous opportunities and participation mechanics within a single, user-friendly application. This eliminates the time-consuming burden of scouting for potentially rewarding ventures, allowing you to focus on optimizing your participation and maximizing your returns.

While the crypto space features numerous airdrop aggregators, identifying platforms that are both reliable and user-friendly can be a complex undertaking. After all, significant disparities exist in the quality and functionality of available aggregators, emphasizing the importance of selecting a platform that aligns with your specific needs. In this context, Bybit Web3 Airdrop Arcade stands out as a particularly compelling solution.

Recognizing the crypto industry's need for accessible and engaging methods to acquire exclusive web3 rewards and early token airdrops, Bybit Web3 Airdrop Arcade delivers a streamlined platform. 

Airdrop Arcade leverages a proprietary analytical framework that meticulously assesses the potential value proposition of each project before integration into the platform. This rigorous evaluation process ensures the curation of prominent projects and promising protocols that meet stringent internal benchmarks, ultimately maximizing the likelihood of users acquiring valuable airdrops. 

Notably, the category of "gem airdrops" signifies tokens or NFTs exhibiting significant price appreciation potential over time. Featuring meticulously curated projects, such as the ongoing 

 with $700,000 worth of crypto airdrops, the platform offers users a simplified path to valuable opportunities.

Airdrop Arcade facilitates a streamlined redemption process, delivering rewards directly to Bybit Wallets and eliminating the potential complexities associated with 

By incorporating gamification elements, Airdrop Arcade enhances the accessibility of crypto acquisition for users of all levels. The platform provides a gamified environment, featuring multiple tiers and challenges and enabling users to discover rewarding opportunities while enjoying the progressive experience of advancing through various stages and levels, ultimately expanding their crypto holdings. 

User-friendly and specifically designed for both beginners and experienced airdrop enthusiasts, Airdrop Arcade curates promising opportunities and presents them as guided quests within the platform's engaging arcade setting.

Upon completion of the tasks on the platform, users are entitled to exclusive crypto airdrops. Additionally, they can participate in on-chain interactions to win airdrops from initial chain token launches such as 

Airdrop Arcade stands out within the web3 landscape by offering a unique value proposition: gas-free airdrop claims. Users who successfully complete designated tasks are eligible to claim their rewards without incurring any gas fees, as Bybit graciously covers these costs on their behalf. This innovative approach significantly enhances accessibility and minimizes barriers to entry for participants, fostering a more inclusive and engaging crypto experience.

Airdrop Arcade’s simplified participation process, presented with clear and concise instructions, empowers users to readily identify tasks required for reward acquisition and seamlessly enjoy exclusive crypto airdrops. Engaging quests integrated with 

 (DApps) provide rewards such as token airdrops and NFTs, which are conveniently delivered directly to users' Bybit Wallets.

Eligibility to Participate in Bybit Web3 Airdrop Arcade

All Bybit users are eligible to participate in Airdrop Arcade events as long as they own a Bybit Wallet, or based on the terms and conditions of each project. Participants also need to have a valid 

 to earn a chance for the giveaways and exclusive rewards reserved for Bybit users. Participants who complete the required tasks on DApps, such as swapping, staking or following their listed social handles, will be eligible for the airdrops.

Airdrop periods may differ depending upon each project’s terms and conditions. Rewards will be explained explicitly on each campaign page, promoting transparency for users. 

There are currently three featured airdrops on Bybit: GoPlus Airdrops, bbSOL Golden Maxi Rewards and Layer AI Fun.

 (GPS) is a multichain web3 security provider that ensures on-chain security protection across the entire blockchain transaction cycle. Running until Feb 20, 2025, 7AM UTC, the 

 gives you the chance to earn from a reward pool of 1,600,500 GPS by completing two simple tasks as follows:

 features an airdrop with a reward pool totaling $700,000 worth of SONIC, J, SSI and ALCH tokens. To win airdrop Red Packets from these tokens, you’ll need to stake SOL for 

 (bbSOL) and complete all the tasks for each project: 

 (200,000 ALCH). You will need at least 0.55 SOL on the 

 chain to complete all the tasks and become eligible to receive the token airdrops. 

Upon staking SOL, you ‘ll receive bbSOL, which is a 

 that allows you to simultaneously earn staking rewards on Solana while engaging in DeFi activities. The airdrop event ends on Feb 17, 2025, 10AM UTC.

 is a unique airdrop campaign that lists five AI agent projects 

 (ZEREBRO) — in a leaderboard. The projects are ranked based on the number of active addresses that have completed all tasks in each protocol's airdrop campaign. 

Running till Feb 21, 2025, you can pick your favorite project and complete tasks to win your airdrops from a $150,000 prize pool. The AI agent from the winning project will then take over the 

Airdrop Arcade for one week, and select projects for you to enjoy a thrilling AI-driven airdrop experience like no other.

 To be a part of this airdrop campaign, simply do the following:

The world of cryptocurrency continues to evolve, presenting a tapestry of possibilities for savvy investors. Bybit Web3 Airdrop Arcade aims to simplify your exploration, empowering you to capitalize on exciting airdrops and NFT opportunities. Our user-friendly platform eliminates the complexities associated with navigating the crypto landscape, allowing you to focus on what truly matters — acquiring valuable digital assets in fun and engaging ways. With lucrative airdrops and exclusive NFTs up for grabs, this is a prime opportunity to jump-start your crypto journey and unlock the potential of web3.

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Explained: What Is Bybit Web3 Airdrop Arcade?

Trading

DeFi

Investing

Crypto rug pulls often happen in DEXs, and they are notorious for your investment. Learn how it happens & spot the rug pull signs before it's too late.

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If you’re standing on a rug and it’s suddenly pulled out from under you, unless it’s a magic carpet, you’d fall on the floor. Worse yet, you might spill or lose everything you were holding onto at that moment. That’s exactly why you need to be aware of rug pulls, especially when you’re trading a volatile crypto asset.

In this guide, we’ll explain what a rug pull is, how it happens and how you can avoid them. Here’s what you need to know to stay ahead and minimize risks.

A crypto rug pull happens when developers create a token paired with a valuable cryptocurrency, list the token on 

 (DEXs), and then pull all the funds out after the investor’s buy-in. 

Rug pulls are usually perpetrated by malicious scammers who create hype around a coin and then abandon the project, running away with the money. These cryptocurrencies are usually paired with reliable utility blockchains, be it on 

 or Binance Chain. This is because investors who swapped their ETH for the listed token gives the creators of the token a chance to withdraw the ETH from liquidity quickly. For example, meme coins are one of the craters that cause investors to concede into the FOMO spirit and get rug-pulled.

) space by pulling funds from a liquidity pool. To understand this in-depth, we need to know how liquidity pools function.

A liquidity pool is effectively a market maker for DEXs, meaning it provides buy and sell orders for a given token. Because there is no centralized system for facilitating trades, crypto exchanges need a way to keep order flow going. It’s also easy to list tokens on a decentralized exchange because there’s no one to audit the token. 

At its core, a liquidity pool is a pile of investor funds locked in crypto pairs that allow users to trade between different cryptocurrencies. Crypto pairs usually include a popular cryptocurrency like Ethereum’s (ETH) because it’s a well-established platform token with high availability. 

To encourage investors to pool their resources and act as a liquidity provider (LP), a trading fee is charged on orders and awarded based on the total value lent to the pool (similar to a dividend). In exchange for the crypto in their wallet dedicated to the pool, each user is entitled to a percentage of the overall fee. The higher the amount lent, the more money an investor stands to make. 

Creators of liquidity pools vie for more investors by offering higher yields. The below graphic depicts simply how liquidity pools function.

Once the creators of a rug pull have amassed a large amount of liquidity providers with substantial capital, they pull all the available assets out. The coins are then exchanged in another marketplace and made untraceable to the victims. Because Ether is often used as the exchange currency, it’s easy to transfer between other wallets and “disappear” to other users. This removes all crypto assets — leaving the pool empty and the liquidity providers with nothing but disappointment. 

Why DeFi Became a Common Space for Rug Pulls 

As the name suggests, DeFi protocols have no centralized oversight relying only on smart contracts, making it a prime target for DeFi rug. In the first seven months of 2021 alone, 

. However, investors are getting savvier, and the amount of crypto stolen on DeFi platforms is down 64%.

With DeFi projects, bad actors can create tokens, raise their profile and recruit investors. By using 

, the tokens are created and listed without audit. All the scammers need to do is create a token with some apparent value, promise use cases, and create a market appeal for investors to buy it. 

As soon as money starts flowing into the project, its value shoots up and the creators sell these tokens, draining the value of the tokens to zero. They essentially take the money promised to the project in token sales for themselves, pack their bags and flee — in other words, pulling the rug from underneath their buyers. 

Since the DeFi space isn’t regulated, it’s easily targeted for crimes.

Rug pulls in cryptocurrency markets are easy to pinpoint — 

In August 2021, a criminal group walked away with 

 of funds taken from investors in one of the largest cryptocurrency DeFi scams to date. All social media accounts and the website for Luna Yield, a project on the DeFi platform Solana, were closed down. When users withdrew (or “unstake”) their funds, they found the pools were empty. They had fallen victim to a rug pull.

In one of the most publicized cases of 2021, Thodex, a Turkish-based platform, was closed, and its founder, Faruk Fatih Özer, is rumored to have 

. Özer is still on the run, but is being pursued internationally by

. Thodex built an active user base of 390,000 financial users. In April, the DEX was unexpectedly closed. It’s still unknown where the missing funds went.

2021 also saw DeFi platform Compounder Finance 

worth over $10.8 million in stolen customer funds. A breakdown revealed that contracts worth $5 million in Dai, $4.8 million in Ether and $750,000 in Wrapped Bitcoin (WBTC) were drained from Compounder Finance. In a scheme that sounds like something out of a thriller, the team replaced their secure and audited contracts with malicious ones that enabled them to steal locked investor money. They also cleverly mimicked the name of Compound Finance, a legit DeFi interest-earning protocol, to lure their marks into investing.

In March 2021, Meerkat Finance, a DeFi yield project using a forked cryptocurrency of 

, perpetrated a rug pull worth $31 million in crypto assets. The platform’s official Telegram channel claimed that its smart contract vault had been compromised. Investigations suggested that either the private key of the Meerkat deployer was compromised or the incident was self-directed by the owners of the project. 

In June of this year WhaleFarm, a DeFi project token 

 in exchange for staking its pool, crashed 99% in a matter of minutes (chart below), scamming investors out of $2.3 million worth of cryptocurrencies. The team, which was entirely anonymous from the start, is still unidentified.

. These range from small value scams in the thousands to 

Image credit: TradingView and Reddit. An example of WhaleFarm Token Rug Pull.

Signs That an Exit Scam and Rug Pull Is About to Happen

 the total monetary amount stolen is dropping because investors are learning to watch for the signs. If you know what you’re looking for, it becomes easier to avoid these schemes. Below are some common signals to help you avoid falling victim to such an exit scheme.

Many DeFi pools offer to facilitate the trade of tokens and lend them inside, creating extra yield to investors in the pool. WhaleFarm, for instance, 

. If you see a yield farm offering returns that are too good to be true, they probably are.

There may be a rationale for creators to remain anonymous, 

 to personal reasons. However, anonymity also makes it harder for bad actors to be tracked after pulling off a scam. If a project is started anonymously, with new social media accounts created within days or hours of a launch — that’s a big red flag. 

If projects have no ties to other successful projects or the crypto community as a whole, that’s also a red flag. Look on a project’s website for meaningful information about the team. If it’s just a bunch of fluff, proceed (if at all) with caution.

With any asset, if you can’t see why the value is rapidly increasing, beware. Scammers can inflate a project by either putting in funds or creating false hype to get people involved in it by exploiting the “FOMO” — fear of missing out. Look for legitimate reasons such as new exchange listings, partnership announcements, or other good news that could be driving the spike. If these are non-existent, it may be a rug pull or 

. Remain skeptical unless you have a good reason not to be.

Most crypto scams are designed with a rug pull in mind. Because of this, the use case for the token or pool is vague and unpractical. Instead, the creators rely on social media posts, crypto influencers and paid advertisements to gain support. Try to understand the legitimate use case for a project before jumping into a new token or pool. All sizzle and no steak won’t provide anyone with a good meal.

Most legitimate liquidity pools lock in investor money for a certain amount of time. This does two things. First, the pool liquidity needed for token swapping, lending and other activities is ensured, so that the pool can continue to function. Second, it keeps the creators from quickly emptying the pool once it gets to a certain size — and running away with the money. A locked pool helps to safeguard investor interests. If there’s no lockup, it’s another red flag. 

By exercising caution and looking for the signs above, investors can mitigate the risk of becoming entrapped by a rug pull. Prudent investors exercise caution when entering new markets or investing in new pools. Greed can make poor business decisions seem much safer than otherwise, so knowing the signs of foul play will decrease one’s chances of falling prey.

Avoiding scams and potential rug pulls in crypto projects ultimately boils down to awareness before investing and doing your own research. Here are a few more ways to check the legitimacy of any project. 

One way to assess a token’s legitimacy is to check its liquidity. Legitimate projects usually have millions in liquidity. These projects lock up a significant amount of tokens for a long time — and again, they cannot be withdrawn from the liquidity pool during that time frame. Check the project’s staking period, and verify the amount of liquidity belonging to a project’s owners. Legitimate platforms like PancakeSwap and Uniswap usually have liquidity information readily available. 

Review Github, Whitepaper and Social Media Channels 

Github is the code base hub for DeFi projects, usually containing their development activities. It’s well worth keeping an eye on these, as well as a project’s social media channels including Telegram, Twitter, etc. If the project is apparently not going through any active development and is a fork of another project, it might be a bad sign.

Any project that’s potentially a rug pull is defined by its owners and creators. Their relevance to the cryptocurrency space, as well as their previous involvements, track records, social media and industry history and connections must add up if they are to gain credibility. The more questions than answers about the owners and team, the more likely the project is to be a scam. 

Look at Holders and Listings on DEX Platforms

If a token has only a few token holders and isn’t actively traded on multiple platforms, it’s possible that it might be a rug pull waiting. Tools like Etherscan and CoinGecko can reveal more information about a token. 

DeFi is a young industry with great potential. It offers the freedom to borrow without any restrictions on credit history. All you need to borrow is collateral. Moreover, DeFi banking is truly private, as there is no centralized authority involved in dictating terms or taking high transaction fees. However, the downside of such an unregulated space is that anyone can list an asset with no central control over it. There’s no one to tell if a project is out to scam people, and that’s where rug pulls come in. 

As with any new technology, unethical players in the crypto space will try their best to con people who have less knowledge and experience. With many new projects, prices can be inflated short-term, and sometimes it can be difficult to separate hype from reality.

Investing in DeFi ultimately comes down to your available funds and your risk appetite. Make sure you do proper research before investing in a project, and really understand what the project is about. Online platforms and tools like 

 can help you evaluate the legitimacy of investments. 

Rug pulls are usually very well planned and blatantly executed. The tokens that have been created promise exciting developments and garner a lot of attention in a short span of time. Instead of executing token sales, however, the teams behind the hoax are orchestrating an exit scam. Investors often don’t realize it until the token is drained of all value and its creators have long disappeared.

With growing interest in crypto, the stakes are becoming increasingly high. Scam artists are constantly looking for ways to make a quick buck off of unsuspecting victims. By keeping track of common signs of exit scams and conducting due diligence on prospective projects, you can decrease the chances that their next victim will be you.

Why Crypto Rug Pulls Happen in DeFi — and How to Avoid Them

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