Friends who frequently chase new coins have definitely experienced this nightmare — just a few minutes after buying in, the coin price drops 95%, and a month's profit vanishes instantly. This is not a low-probability event; it's actually very easy to encounter.

Why does it suddenly plummet? It may seem sudden, but there are early warning signs. Basically, there are a few scenarios:

**Rug Pull**: Developers or large holders directly drain the liquidity pool, causing the price to drop to zero on the spot. Many projects have done this last year.

**Liquidity Exhaustion**: The pool is too small, with buy-sell spreads exceeding 20%, making it especially easy for big players to manipulate and dump.

**Code Manipulation for Dumping**: Some projects secretly modify the contract, infinitely mint tokens, and then dump them all at once on exchanges. We caught such cases not long ago.

**Black Swan Events**: Sudden regulatory news or chain failures that trigger a crash.

**How to proactively avoid these pitfalls?** Here are some practical tips:

Start with on-chain tools. Use a block explorer to scan the contract, focusing on whether liquidity is locked for at least 6-12 months. If it's not locked or the lock-up period is very short, the risk is already flashing red.

Next, check the distribution of holdings. If the top 10 wallets hold over 90% of the supply (usually reserved for developers), that’s a ticking time bomb. When they sell off, that’s your crash day.

When trading, it’s best to monitor two windows simultaneously — one for market trends and one for progress. Also, spend time checking the team background and project official information — reputable projects are usually transparent about these.

Essentially, the meme coin market is an arena of information asymmetry. Doing your homework can help you avoid being harvested.