4 Red Flags That Make NYC Token's Crash Look Like a Rug Pull

Source: CryptoNewsNet Original Title: 4 Red Flags That Make NYC Token’s Crash Look Like a Rug Pull Original Link: Former New York City Mayor Eric Adams’ NYC meme coin has drawn heavy criticism from the crypto community after plunging more than 80%, pushing its market capitalization below $100 million.

While both Adams and the project’s team deny any wrongdoing, unusual liquidity movements raised red flags, prompting some analysts to characterize the token as a potential rug pull. A Nansen analyst outlined 4 reasons why NYC token appears to fit the broader definition of “rug pulls.”

Around 60% of Traders Suffer Losses Following NYC Token Meltdown

Earlier this week, it was reported that Adams revealed the token at Times Square. It surged shortly after its launch, but the rally was unsustainable.

The coin immediately hit $500 million in the market cap before Eric withdrew liquidity from the coin. This caused a massive 80% crash, and the token went below $100 million.

Blockchain analysts identified unusual liquidity behavior. Analysts alleged that Adams removed $3.4 million from the token’s liquidity pool. Suspicious liquidity activity was also identified by on-chain analytics platforms.

In a separate analysis, the fallout from the NYC token was highlighted. Around 4,300 traders interacted with the NYC token, with roughly 60% recording losses.

• 2,300 traders lost less than $1,000.
• 200 traders incurred losses ranging from $1,000 to $10,000.
• 40 traders lost between $10,000 and $100,000.
• 15 traders incurred losses exceeding $100,000.

Was NYC Token Rug Pulled?

Nicolai Sondergaard, Research Analyst at Nansen, stated that the reason the NYC token can be grouped with other rug pulls is due to how liquidity was removed. The analyst outlined 4 key reasons:

• The team did not make a prior announcement regarding a planned liquidity “rebalance.”
• A large amount of liquidity was removed in a very short period rather than gradually.
• The liquidity that was withdrawn was not fully added back.
• Liquidity was removed only after the token had already reached high levels.

If it was a legitimate move I would have expected to see small changes as well as an advance mention that things would be shifted around. This likely would not have had a negative impact on the token.

Sondergaard explained that removing liquidity, even partially, significantly increases the impact of a single sell order. A sell order that would not have significantly affected the price under normal liquidity conditions can suddenly move the market much more, often triggering panic, cascades of sell-offs, and even forcing traders with limit orders out of their positions.

What they did effectively trapped traders, forcing many to sell at a loss in a lower liquidity environment, and adding liquidity back in does not undo the damage done. Neither does setting up DCA orders undo the damages, but rather, it’s a bandaid solution.

Sondergaard emphasized that, from a market integrity standpoint, clear and transparent communication around liquidity is essential. Traders cannot accurately assess risk if liquidity can disappear without warning.

The analyst noted that incidents like this undermine trust across the broader ecosystem. Better transparency standards, combined with analytics-driven oversight, could help distinguish legitimate projects from bad actors. Sondergaard suggested that:

It’d be prudent for investors to in any case exercise caution whenever they trade memecoins. It is always worthwhile to look at holder distributions, does it seem like buy volume heavily outweighs sell volume, was one-sided liquidity provided (e.g., only in the token or was usdc also added?

Adams Denies Rug Pull Allegations

Amid this backlash, the former mayor’s spokesperson, Todd Shapiro, shared a statement pushing back against the claims. He denied reports that Adams moved investor funds or profited from the NYC token’s launch, stating the allegations are false and unsupported by evidence.

The spokesperson noted that NYC Token experienced price volatility typical of newly launched digital assets. He reiterated Adams’ commitment to transparency, accountability, and responsible innovation.

Previously, the NYC Token team attributed the liquidity movements to a rebalancing process following strong demand at launch.