Defining Exit Liquidity #26
By Captainjames.eth
A quick definition of google gives us Exit Liquidity as a reasonably detailed calculation by the Company of the Liquidity it will have on the Effective Date, after giving effect to all Exit Payments and the funding of the Rights Offering.
You may have at some point heard this terminology be used. Today, my goal is to inform you of a typical Crypto scam that many people all over the world succumb too
This is Exit Liquidity strategy.
Examples of Exit Liquidity
In November 2017 a start-up company called Confido disappeared from sight. It collected a grand total of $375,000 as an initial coin offering (ICO). The Coinfido market cap went from $6 million to only $70,000 within a week of its exit scam.
False promises have led companies like LoopX to overpromise and lead customers down a fantasy. LoopX is another start-up that promised the world as an ICO that guarantees profit every week from its trading software. The start-up raised $4.5 million from investors in Bitcoin and Ethereum before being shut down in 2018.
Baby Musk coin raised $2 million on its ICO before it was revealed the founders used false names and ran with the money- right before they stated the website was not a rug pull.
CryptoSis was founded by porn actress Lana Roades (trying to take of the porn NFT market by storm) which she quickly abandoned before running off with 1.8 million. Roades has denied the project was a scam as she has sent the money to her ‘development team’ with her twitter deleted she has performed the ultimate act of Exit liquidity on her buyers.
As we can see from these examples, people with large followings and established communities of influence can easily overpromise on the premise of an NFT or Crypto project.
The hype is driven by extensive and well-planned marketing that drives people to buy up projects. During this hype. The founders of these projects are able to use their followers or potential investors (drawn into the hype) as exit liquidity. They literally dumb/sell to their followers who are unknowingly buying the top of a project.
The Beanie Situation
A surprising turn of events and excellent use of exit liquidity came in the form of influencer Beanie. Known as the ‘Marketing’ person from Pixel Vault (Who was eventually fired and doxed in a massive ethical battle that is a tale for another day). Beanie had created BGLD and Bloot and had made a post where he stated he would ‘dedicate his life’ to support the new token of BGLD.
As you can see from the graph above. Beanie has made a big statement on his Twitter. It also got a lot of engagement.
The graph shows a massive crash and dump from GREEN to RED and then to 0.
Beanie has effectively extracted liquidity by dumping on his followers.
How to avoid becoming Exit Liquidity
The exit liquidity strategy was used a lot during the early crypto ICO boon and the following Defi summer (early 2020) where tokens were hyped and sold to enthusiastic customers unknowingly, they have become the exit to the founders or owners of the brand.
So how do you minimize your chances of becoming someone else exit liquidity?
Here are some simple steps
1) Extensive research on the project. This not only includes the project’s idea but doing background checks on the founders. Are they Anon? that can be a red flag. If they are doxed what are similar projects they have done and have they been successful?
2) Check for bots of suspicious activity on the social media accounts to see if there is organic engagement.
3) Is the project unique and fix a gap within the current marketplace?
Have a great week everyone