Introduction
The crash of the second largest Cryptocurrency exchange – FTX, has launched us into a new era in the history of cryptocurrency today. This era is now popularly known as the Post-FTX era. The sad experience of investors who lost their deposits with the exchange including the creditors – who have been unable to access their funds till now, has given investors a new perception of how to relate with the Centralized crypto exchanges. While many today have resolved never to deal with Centralized crypto exchanges again, others are bent on using the Centralized crypto exchanges only for buying cryptos, while they transfer them to their cold wallets for proper security.
Is this the most viable option for storing cryptos today? Can investors ever regain trust in the Centralized Cryptocurrency exchanges in the future? What are the prevalent attitudes of Investors toward the crypto industry today? This work has provided useful insights into these pressing questions.
Crypto industry suffers a setback due to the Crash of the FTX exchange
The crypto market witnessed one of its saddest moments in history on November 11, 2022, after the second largest crypto exchange in the world filed for Chapter 11 bankruptcy protection under US laws. This has left its creditors and investors unable to access and withdraw their funds up to this point.
The exchange was found guilty of mismanagement of investors’ funds, including diverting investors’ deposits to serve its purpose of sponsoring its sister company known as the Alameda Research company. Over $6 Billion worth of funds from investors were found missing after the exchange crashed to zero from its $32 billion worth as of the beginning of 2022. This triggered massive selloffs among crypto holders leading to a massive price crash for all cryptocurrencies during this period. Bitcoin for instance fell to a new low at $15,462, while Ethereum crashed to a new low at $881.
Other Cryptocurrencies suffered the same fate too. The market is yet to recover fully from this shock as the buying appetite for Cryptocurrencies reduced significantly due to this backdrop. Many today believe that this crash has launched us into a crypto winter without any hope of immediate recovery. Is this a correct supposition?
What does the Post-FTX Era look like in the crypto industry today?
The Post-FTX era has launched us into a crypto winter marked by a general loss of appetite in buying Cryptocurrencies. Thus, the price of Bitcoin and altcoins had been unable to bounce back strongly after the massive fall witnessed earlier in November as a result of the crash of the FTX exchange.
The Post-FTX era has been one characterized by large skepticism towards storing Cryptocurrencies using Centralized crypto exchanges. Many investors today now feel that the best option for them is self-custody. A lot today only utilize the Centralized crypto exchanges for buying Cryptocurrency while they transfer them for storage to their cold wallets.
Above all, the Post-FTX era has reactivated the desire by various regulatory authorities across the globe to regulate all forms of cryptocurrency transactions. Many countries’ regulatory agencies including France, the UK, Canada, etc have proposed new laws giving the regulatory authorities more control over the crypto industry in their countries today.
What are the important lessons to learn from the FTX crash?
The FTX crash has taught all crypto traders many important lessons to always remember about their crypto investments. Some of these lessons are:
- Crypto investments bear so many risks to the investors’ capital.
- Self-custody is best over centralized exchanges.
- Only invest what you can afford to lose.