A sizable portion of this world’s population has grown to love trading, buying and selling with all kinds of cryptocurrency assets as well as NFTs. This makes sense too as after all, who wouldn’t want to be a part of one of the fastest-growing industries of all time and earn a lot of money while doing so? But, this popularity comes with the possibility of investors in cryptocurrency projects that may be fraudulent or disingenuous.
A ‘rug pull’ occurs when developers steal funds from investors and quit the project after a large sum has been allotted to the fraudulent DeFi project. These types of projects are often started by people with evil intentions and ulterior motives. One of the more recent famous rug pulls was that of the ‘Squid Game (SQUID)’ cryptocurrency, a project which looked to cash in on the massive success experienced by a Netflix show of the same name. It didn’t take too long before rug pull reports started coming in after investors had been successful in attracting.
Therein lies the problem though, as a large number of investors usually prefer to ‘get rich quick’ and so end up investing in projects which are based solely on the hype, with this usually resulting in substantial losses. NFTs are currently experiencing the same problems as other sectors. NFTs involve many people who have no knowledge of their projects. Some of the more well-known NFT rug pulls involve the ‘Baller Ape Club’ (which was an obvious copy of the ‘Bored Ape Yacht Club’) and the ‘Iconics Presale’, which involved a teenager stealing a massive 1,000 SOL before deleting all social media accounts and activities.
What’s the solution?
It is quite simple and straightforward to use AI-driven data analytics to assist investors in making more informed investment decisions. Many groups are working already on this, including Delphi Digital, Dune Analytics and Defy Trends. Defy Trends’ all-women team, in particular, had actually used both on-chain and off-chain data analytics to predict the crash which happened this past May.
Defy Trends CEO Imgesu Cein and co-founder believes that string analysis, data science algorithms, and real-time information about market sentiment is crucial. “We are able to use AI-powered market forecasting to give investors the information they need to make informed decisions without doing all the thinking for them,”Cetin. “There are numerous trading bots out there, but we think our approach gives people the information to be informed of what is happening on-chain and off-chain so they can focus on the metrics they think matter.”
However, investors must be aware of what they are investing in. Data analytics may be the best way to find out. It is possible to know the blockchain data (on-chain) and what happens outside it (offchain). This can help you decide whether or not you are investing in a real project. The fraudulent use of cryptocurrencies and NFTs will increase in popularity. One should therefore be cautious and rely on data analysis.