One of the biggest cryptocurrency exchange platforms, Future Exchange, commonly abbreviated as FTX, has filed for bankruptcy – announced the company on November 11, 2022. Be it due to a recent hack, mismanagement of funds, or lack of liquidity, the platform crashed and burned, causing billions of dollars in losses. Unsurprisingly, it took down Ethereum and Bitcoin as well – their values dropping to a two-year low.
Let us look at the top five lessons investors and traders can learn from this catastrophic event.
Wallets Vs. Exchange
Crypto advisors circle back to the age-old theory: Take complete control of your assets – forget exchanges, use wallets. No matter how safe a “big” exchange platform may seem, the FTX debacle is enough proof that you should rely on your wallet to store your funds safely.
You might have heard this term a million times in the erratic crypto industry. But that’s because you should never put all your eggs in one basket. In the crypto world, you win big; but you can also lose big. If the most trusted Bitcoin and Ethereum can take such a significant hit, you should know now that all bets are off – spread out your investments if you’re trading cryptocurrency.
Have a Back-Up Plan
“If all goes down, what should be my way out?” – Have a definite answer to this question. Knowing the ins and outs of all possible risks of your crypto investments is the first step in formulating this plan.
Remain on your Toes at All Times
It would help if you never dismissed warning signs in crypto. If you sense something is wrong, ensure you remain on top of it. Many people reported averting disaster by way of taking action. When they got a whiff of the FTX meltdown, they went with their gut and withdrew their assets from the exchange – a quick decision that possibly saved them from going under.
Trust your Own Research
A worship culture prevails today, where new traders listen to their favorite celeb investors. While they may lead their followers to success, chances are, these celebs have just as limited knowledge as their followers.
When it comes to this volatile world of investment, it is always better to trust your own research over someone else’s, especially if that someone isn’t a person with formal/proven experience to their credit.