I hope everyone is doing ok. It’s been a hell of a week in crypto, and I need to arm you with some important information about what’s been happening and how you can protect yourself if you’re using exchanges. This will be direct and to the point:
FTX Collapse
One of the largest exchanges in crypto, FTX, who were running Superbowl commercials earlier this year, has collapsed and filed for bankruptcy, despite being valued at over $33Bn just over a week ago. Any users who had funds on the platform are extremely unlikely to recover them. There is a long story here, that is being well covered on Twitter. I recommend going to the excellent Dylan LeClair to get the full run-down. I will write more about it too, but in short, FTX appears to have been run like a Ponzi and the CEO is likely going to prison. For now, there are more pressing things you should know.
Exchanges are not safe
The lesson here is that if you hold funds or assets on exchanges, they are not safe and not protected by government or anyone else. Do not assume deposits are insured like banks, just because the user interface looks professional, THEY ARE NOT. Any funds that you have on an exchange belong to them and not you, until you remove them. The people who run exchanges are still subject to the law, but this is a deterrent and punishment, it does not protect you upfront.
Learn to self-custody
If you want to remove risk, you must learn to take assets off exchanges and take responsibility for them yourself by practicing self-custody. Please reference bullets 3 and 4 of issue 14, then check out the sites below for hardware wallets, should you want to action it. Or feel free to get in touch directly and I’ll help walk you through it.
Price Impact
There is huge selling pressure on Bitcoin and other assets, meaning the price of Bitcoin in USD is falling. FTX had significant holdings of Bitcoin and other assets it needed to sell quickly, and users are now selling what they have for fear of losing it. There is contagion here too, because FTX loaned funds to lots of other businesses (BlockFi has paused user withdrawals and looks in trouble) and harder questions will rightly be asked of other exchanges.
I’m going to leave it there, because I don’t want the message of these bullets to be lost and I want to get it out asap. If you have any crypto on exchanges, know the risks and how to minimise them. And finally, please remember Bitcoin and crypto are not the same. Bitcoin has not changed and does not care about FTX. It keeps validating blocks every 10 minutes and I believe will still be here long after FTX is forgotten, which may take a while.
Peace, love and Bitcoin
Rob
As always, this is not financial advice and is my own opinion. I do not represent my employer in these letters. Please do your own research.