Cointime

Download App
iOS & Android

FTX Disaster: Expectations, Lessons & Opportunities

Validated Individual Expert

In their latest announcement, Binance decided to back out from its planned acquisition of FTX. At the same time, major news reported that FTX’s liquidity gap could be more than $10 billion. Meanwhile, FTX is still seeking help from other companies.

Binance says ‘No’.

WSJ sharing some insights on the FTX disaster.

Things look ugly and the market is in full crisis mode.

So, what else can we expect to happen? What will be the consequences for the crypto space and what can we as investors learn from all of this?

Expectations

Let’s start with what I expect to happen in the short to to medium term. Much is still unknown and it will likely take us into 2023 to fully understand what has happened.

1. Prices will crash hard

In my previous article, I wrote about the increasing probability that BTC will fall to $10K. So far we are staying on track. In general, we can expect a lot of price volatility for all cryptocurrencies in the coming weeks and months. The bad macro picture doesn’t help at all.

2. There will be contagion effects

It won’t be only FTX users who suffer. This collapse affects a lot of different parties reaching from holders of FTX-related assets to FTX employees, crypto VCs and other institutions that invested in the project (for example, Blackrock, Paradigm, Ontario Pension Fund), as well as other crypto projects that FTX has invested in (for example, Solana). In the coming weeks we can expect a lot of other ugly things to surface and various players in the crypto space seem to be taking precautions.

Contagion in action.

3. FTX is not the the last crypto exchange to fall

There are many more exchanges out there — some of which also have problems. It is to be expected that more will be hit. At the same time, people’s trust in centralized exchange will further decreases and they could face large withdrawals of funds in the short to medium term.

4. A feast for crypto opponents

This whole mess is a gift for those who are against crypto. And not without reason. Because the reasons for this disaster are exactly those things that have always been criticized about crypto.

5. More regulations incoming

The crypto space has increasingly become the focus of regulators in recent years. The FTX collapse will further reinforce this trend. There will be more regulations targeting centralized crypto exchanges and cryptocurrencies to prevent such things from happening.

SEC is on the move. Source: bloomberg.com

Tether freezing a FTX USDT wallet at the request of law enforcement.

6. Time to shine for DeFi?

Once again, centralized crypto services have proven unreliable. I expect that DeFi projects will benefit greatly from this — in the medium to long term.

Lessons

Alright, what are the main takeaways for you as an investor when it comes to dealing with exchanges? There are two important points I want to discuss here.

1. Not your keys, not your coins

If you are in crypto for long-term investments, do not leave your coins on any exchange. The money that people had on FTX is gone. And it won’t come back.

Whenever you buy cryptocurrencies, take them off the exchange and transfer them to a hardware wallet and keep your private keys safe. If you are into trading, leave only a small amount (that you can afford to lose) of your coins on the exchange.

2. Don’t stake your coins on exchanges

Many exchanges offer easy to use solutions for people who want to stake their coins to earn PoS rewards but who do not know how to set up their own node. Don’t. Instead, buy PoS coins supported by hardware wallets for staking. Ledger has a list of supported coins and detailed tutorials on how to stake. Alternatively, you can use services such as allnodes.com to set up your own nodes and earn passive income on your coins. Allnodes allows you to hold your own private keys.

Opportunities

However, crises also bring opportunities. As we can expect more price turbulences in the coming weeks weeks, now is a good time to plan your next steps. A few thoughts:

  • If you are investing in Bitcoin and Ethereum for the long-term, this is a good time to optimize your DCA strategy. Dollar cost averaging is a great way to buy coins at a relatively cheap price. Check out my article on this topic if you want to learn more.
  • Usually, altcoins dip more than Bitcoin and Ethereum during a black swan event. Research solid projects that are at a price low (pretty much everything right now). Stay away from projects that are involved with FTX for now. Given the circumstances, investing in innovative DEX projects could probably be a good opportunity. Check out my in-depth article on how to research cryptocurrencies to learn more.
  • Also, take the time to set price targets for all your holdings for the next bull market (whenever that may come). Make a note of these price targets and place them prominently so this doesn’t happen to you:
  • Instead, you should do it like this:

Final Words

Things are a mess. Expect to see cracks elsewhere in the cryptosphere over the next few weeks. At the same time, take the points made in the article to heart. Make sure you are always in full control of your coins and take the time to thoroughly plan your next steps. The winter is long, but Crypto will survive!

Disclaimer: this article only represents the author’s personal opinion. It should not be treated as financial and investment advice.

Comments

All Comments

Recommended for you

  • BTC falls below $88,000

     market shows BTC fell below $88,000, currently at $87,997.85, 24-hour decline reaches 0.88%, market volatility is significant, please manage your risk accordingly.

  • The U.S. spot Ethereum ETF saw net inflows of $84.59 million yesterday.

     according to Trader T monitoring, the US spot Ethereum ETF had a net inflow of 84.59 million USD yesterday.

  • ETH breaks $3,000

     the market shows ETH breaking through $3000, currently at $3000.08, with a 24-hour decline of 0.38%. The market is highly volatile, please manage your risk accordingly.

  • Binance Wallet launches "secure auto-signature" service

     according to the official announcement, Binance Wallet has launched the "Secure Auto Sign" (SAS) service: it now supports mnemonic/private key wallets to trade on Binance Wallet (web version).

  • Circle minted 500 million USDC on the Solana network.

    according to Onchain Lens monitoring, Circle has minted 500 million USDC on the Solana network. Since October 11, Circle has issued a total of 18 billion USDC on the Solana network.

  • Sources familiar with the matter: JPMorgan Chase is considering offering cryptocurrency trading services to institutional clients.

    according to Bloomberg, as major global banks deepen their involvement in the cryptocurrency asset class, JPMorgan Chase is considering offering cryptocurrency trading services to its institutional clients. A knowledgeable source revealed that JPMorgan is evaluating what products and services its market division can offer to expand its business in the cryptocurrency field. The source stated that these products and services may include spot and derivatives trading.

  • Federal Reserve Governor Milan: We believe that the policy rate will eventually be lowered.

    Federal Reserve Board member Mylan stated that due to the US government shutdown, there were some anomalies in last week's inflation data; he believes that the US will not experience an economic recession in the near term, but if policies are not adjusted, the US will face an increasing risk of economic recession. We believe that policy interest rates will eventually be lowered.

  • BlackRock deposited 819.39 BTC, worth approximately $73.72 million, into Coinbase.

     according to Onchain Lens monitoring, BlackRock deposited 819.39 BTC into Coinbase, worth approximately 73.72 million USD.

  • Ghana passes law legalizing the use of cryptocurrency

    according to Bloomberg, the Ghanaian Parliament has approved a cryptocurrency legalization bill aimed at addressing the expanding use of cryptocurrencies in the country but the lack of regulation. According to Johnson Asiamah, Governor of the Bank of Ghana, the newly passed Virtual Asset Service Providers Act will facilitate the licensing of crypto platforms and the regulation of related activities.

  • CryptoQuant: Bitcoin network activity cools, market shows clear bearish signs.

    CryptoQuant published an analysis stating that the Bitcoin market continues to be in a bear market state, with multiple network indicators showing a significant cooling of activity. Data shows that the 30-day moving average of Bitcoin is below the 365-day moving average (-0.52%), and the bull-bear cycle indicator confirms the current bear market pattern. The number of network transactions has dropped from about 460,000 to about 438,000, fees have decreased from $233,000 to $230,000, and highly active addresses have reduced from 43.3K to 41.5K, all indicating reduced speculative activity and that the market is in a defensive phase.