What’s Next For Crypto
FTX became insolvent this week, and the situation is much worse than any of us could have imagined. It’s an event that has set back the entire cryptocurrency industry by years. Not only in prices or when the recovery would eventually begin. But more importantly, the trust in the crypto market and the harsh regulations that will definitely come as a result of this.
Most people in the market are at a loss for words. This wasn’t supposed to happen. While there have been many crypto exchanges that have come and gone. Most of them always had a less-than-ideal reputation. FTX was a top 3 exchange, on the verge of possibly becoming number 1. It had a stellar reputation, and its CEO SBF was the industry's new “golden boy”. Many people felt it was one of the few exchanges that could be trusted enough to keep crypto there. After all, they had survived the summer of chaos and appeared to be in great financial shape.
Not only had they survived the summer of insolvencies, but they were flexing their financial might. They were on the verge of purchasing Voyager, and Celsius, and had even taken a large stake in Robinhood, and the list goes on. There was legit fear that FTX and SBF were becoming too powerful in the crypto industry. That they were on the verge of creating a monopoly.
But, not everything was how it seemed. The water was drained from the pool, and we were able to see who was swimming naked. FTX and SBF tried to pull the biggest heist/scam that the crypto world has ever seen. One way or another, things will never be the same after this.
The Users Affected
Someone reading this article will likely have had their funds locked up on FTX. With the recent “hack” that has taken place on the exchange. The hope that users once had to even receive cents on the dollar, has now evaporated. It’s likely that those funds will never be seen again. My heart goes out to each one of you. I understand how painful it is to “lose everything.” Especially when you weren’t doing anything risky. It wasn’t like you were lending out your crypto, or even trading with leverage. Users were just keeping their funds on an exchange. As I mentioned before, it wasn’t an exchange that most would recommend not to use. But one of the most respected in the industry.
The Domino Contagion Effect
If there is one thing that is certain in this situation, it is that we haven’t seen the end of the contagion effect that FTX/Alameda /BlockFi becoming insolvent will have. The water is being drained from the pool, and we will see that FTX wasn’t the only entity that was swimming naked. Similar to how we learned that Voyager, Vauld, and several other companies were also insolvent during the summer.
Investors in the cryptocurrency market often have a mindset that they are always striving to earn as much money as possible. Always searching for the next big thing or method to make that happen. If you take anything away from this article, you need to immediately adjust your thinking. We are no longer in a “money-making” mindset, instead, we need to enter survival mode.
There have been rumors of several other exchanges, lending services, and funds that are also insolvent.
What this all means is that no one can be trusted. Even if they say that funds are safe, they could be lying. Remember, just hours before FTX officially admitted being insolvent. They were declaring that everything was fine. Your biggest focus right now should be getting your funds off all exchanges, lending services, and anywhere that there is a risk.
I have done the same. Ending my loan prematurely at NEXO, withdrawing from all exchanges. Putting all of my funds into self-custody. For the time being, passive income with crypto is not something that I’m willing to risk. Keeping my funds on a centralized service is also something that I’m not willing to risk.
Picking Up the Pieces
I am one of the most bullish people on the future of Bitcoin and crypto. Always trying to persuade people that this is the future and that they need to get in as soon as possible. Today, I feel it wouldn’t be responsible of me to try to convince anyone to enter this market. This has been horrible for the entire image of this industry. We as an industry need to do better.
Yes, trying to get rich will always be a key component of this industry. But we need to move back to the era when we were all more concerned about being decentralized and giving the world better money. We have been sent into a cold winter that could be longer than the average bear market.
Looking Forward
For those of you who lost everything, I sincerely feel your pain and my thoughts go out to you. I also hope that it doesn’t result in you leaving this industry forever. While it may be difficult to hear at the moment, there is still time to recover from this.
And that is what we all need to do, begin the recovery. I believe that there will be a contagion effect that results from this situation and prices will either go down or remain sideways for much longer than we would like. However, crypto isn’t dead and will come back even stronger in the future. What this all means is that for those who can somehow remain convicted. Now will be perhaps one of the greatest accumulation zones in cryptocurrencies’ history. Allowing those who lost everything to have a chance to recover, and the most convicted to build a significant portfolio.
That is exactly what I’m doing right now. I won’t lie, this is an event that has really hurt my soul and made me take a step back to reflect on this entire industry. After reflection, I still remain a huge component of this industry and view now as perhaps the final great opportunity to build wealth in this industry. With that said, in the past, I took on great risks in order to earn a passive income with my crypto. That is no longer a risk that I’m willing to take. I didn’t lose any crypto during this situation but still have been reminded of the most important lesson in crypto. SURVIVAL. I will therefore be putting all of my crypto into self-custody for the time being.
How about you? What are your thoughts on everything that’s happened this week?
As always, thank you for reading!