In May 2022, Terraform Labs' LUNA cryptocurrency and TerraUSD (UST) stablecoin crashed, causing a huge shock to the cryptocurrency industry. Six months later, the battered industry received another blow when one of the largest cryptocurrency exchanges, FTX, filed for bankruptcy and billions of dollars in user assets disappeared. The FTX empire, once valued at over $30 billion, fell to zero in less than 10 days.
FTX reportedly has more than 1 million creditors, most of whom are retail investors who were convinced that FTX would not collapse and had kept their assets on the exchange. Taking a look at Mt. Gox in 2014, whose creditors were still unable to claim compensation, FTX may be a repeat of that mistake.
It can be said that FTX succeeded thanks to Alameda Research and also failed thanks to Alameda. An investigative report led careful users to discover serious problems with Alameda's balance sheet, which then led to a deeper dive into his unclear and unexplained financial dealings with FTX.
Many well-known venture capital and crypto firms have also been caught up in the issue. Sequoia Capital, Temasek and others announced that they would reduce their investments in FTX to zero; BlockFi, a crypto lending platform, filed for bankruptcy due to its exposure to FTX; and cryptocurrency broker Genesis, a subsidiary of Digital Currency Group, is on the verge of bankruptcy due to a liquidity crisis and may not be able to pay back investor funds.
When the crypto tide ebbed, we found out who was swimming naked. After the madness, the market is in a mess.
The FTX crash provides a valuable opportunity for all users, professionals, and policy makers to reflect on the issues and reinvent the cryptocurrency industry.
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I don't think we should blame the FTX failure on the cryptocurrency itself. It does not mean that the appearance of Bitcoin (BTC) and the crypto industry was a mistake. We should be thinking about the business models that cryptocurrency exchanges run and how to effectively decentralize governance etc.
The overturned cart in front is a warning to those behind. The implosion of the exchanges is mainly attributed to their non-transparent funding disclosure. We have seen major cryptocurrency exchanges including Binance, OKX, and Huobi Global announce their fund reserves to prove their security and ensure user interests.
The impact of the FTX bankruptcy still needs a long time to be digested, and the crisis will not stop here, but I believe in the unstoppable explosive momentum of the cryptocurrency industry.
The crypto industry has its twists and turns as it develops, but its future is bright. While 2022 is a particularly difficult year for the crypto space, it will continue to grow, evolve, and seek a way out amid skepticism.
Related: From the NY Times to WaPo, media fawn over Sam Bankman-Fried
With the COVID-19 pandemic raging and the global โwave of rate hikesโ, the crypto winter could be harsher and longer than expected. Although we cannot accurately predict and estimate how long it will last, we can overcome difficulties together.
As a journalist who has worked on the front lines of the industry for many years, I have learned some profound lessons from the fall of LUNA to the collapse of FTX:
- If you hear rumors about an exchange or project being insolvent, be sure to transfer your assets as soon as possible. As an old Chinese saying goes, a real man will not stand next to a collapsing wall.
- Not your key, not your coins. This is a clichรฉ, but it is also true. The only way we can protect our crypto assets is by keeping our own private keys.
- Cash is king when a crisis strikes. As bubbles burst and asset prices plummet, holding cash can help us safely survive the difficult period.
- Don't borrow money to invest and don't leverage. For most people, borrowing and leverage will only hasten bankruptcy. FTX was not immune to this.
- Keep up with the industry by learning new things about centralized finance and decentralized financetokenomics, on-chain activity, how to use cold wallets, etc.
Personally, I am a cryptocurrency enthusiast and supporter with a long-term view of blockchain technology. The crypto industry has faced its darkest hour more than once. There is no manufacturing without a break, and I hope that we can regain our confidence in the industry.
After the FTX accident, chinese cointelegraph was the first to host several Twitter Space conversations, inviting crypto veterans to discuss the impact and lessons of the crash.
As a platform, Chinese Cointelegraph hopes to introduce the most timely and high-quality crypto news to Chinese-speaking users to help them grow.
Also, chinese cointelegraph It is always committed to helping and guiding crypto users to establish correct and scientific values โโwhile promoting the development of crypto space and Web3.
Finally, a classic quote from the great philosopher Friedrich Wilhelm Nietzsche for those who keep building: "What doesn't kill me makes me stronger."
tracy zhang is the executive director of chinese cointelegraph. He graduated from Zhengzhou University before attending Paris-Sorbonne University of French Studies.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
