Lessons We Can Learn From FTX’s Collapse
These lessons will help us survive and navigate this crypto winter.
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First of all, if you’re still interested in crypto after all that’s happened within the industry, you should congratulate yourself because you’re most likely to survive the bear market!
However, if you’re not careful enough with your crypto investments, the bear market will definitely tear your portfolio apart, just like what it did to Voyager, Celcius, and recently, FTX.
The good news is that if we all could learn the lessons from FTX’s collapse, we could eliminate or at least lessen the risk of losing your crypto investments during these trying times.
There’s no such thing as a high-yield and risk-free investment
Yes, you read that right. All investments that promise you a high interest has inherent risks. If a centralized exchange offers you 20% APY for staking your coins, it has inherent risks, even if they say it’s entirely “risk-free.”
If you are staking or locking up your funds in these exchanges, you always need to be aware of the happenings in the crypto industry and be ready to withdraw your funds if necessary.
FTX was able to offer those high staking rewards because they’re basically gambling with the funds you staked on their platform.
It is important to listen to “FUD”
Gone are the days when investors should label every criticism against your favorite coin FUD. Part of doing-your-own research in any investment is to listen to every side of the story, including the negative ones.
Before FTX collapsed, there were already rumors spreading around that the company was already going bankrupt. However, many FTX investors paid no attention to these rumors and labeled them FUD. As a result, a lot of them eventually became collateral damage to FTX’s collapse.
There’s no such thing as “too big to fail” in crypto
To those new to the space, this is not the first time a centralized crypto exchange (CEX) failed. A few years ago, Mt. Gox, the biggest CEX in 2014, which handles over 70% of all Bitcoin transactions, was hacked and eventually went bankrupt.
This bankruptcy stole the Bitcoins of all their investors who left their funds in the CEX. Since then, 8 years have already passed, but none of them have recovered their Bitcoins.
The decentralized nature of cryptocurrencies means that if a crypto company fails, no one will be able to bail anyone out. So, unless regulators pass some sort of regulation, the possibility of recovering your funds from these failed exchanges is very slim.
Not your keys, not your coins
Lastly, the recent failure of FTX, a centralized exchange, proves the old crypto adage, “Not your keys; not your coins.”
If you don’t hold your coins in your crypto wallet with its own seed phase, then someone else controls your coins. It means that the person holding your coins can gamble with your funds, just like what FTX did.
So, to ensure that your coins are safe and inaccessible to anyone else but you, it is essential to keep them in your self-custodial crypto wallet. No one can keep your coins safer than you.
If you want to ensure that your coins are as safe as possible, you can even consider buying a Trezor hardware wallet. Unlike regular crypto wallets, a Trezor hardware wallet generates its seed phrase offline. This feature means that a hacker virtually has no chance of accessing your coins!
Not only that. But with the Trezor hardware wallet, you can safely buy, sell, and trade cryptocurrencies with its proprietary application. This way, you no longer need to entrust your coins to any centralized exchange if you want to trade!
Safely HODL, trade, and secure your cryptocurrencies today — buy a Trezor Hardware Wallet.
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