The FTX Collapse : Lessons To Learn For Investors

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(Edited)

There is no such thing like a free lunch trying to make some quick bucks in a still fairly new and unregulated financial industry and this is a harsh reminder from the collapse of FTX.

And the rule of thumb when are looking to invest in crypto is, you should invest the amount of money you can afford to lose.

The recent collapse of FTX did point out a few lessons for investors to learn.
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Know Where Are You Holding Your Crypto

Investors need to understand where cryptocurrency is held and what are the possible risks associated to it.

I did share about the topic in my earlier post The Rising of Crypto Self-Custody.

The FTX crash has made investors to think about cold storage wallets or taking cyrpto offline making it less susceptible to hacks.

However the move makes a crypto less liquid and harder to trade quickly.

Diversification is Important

Whether you are investing in stocks, cryptocurrency or other asset, according to experts, holding a large percentage of a single asset could be risky.

Talking of Bitcoin itself, since BTC topping an all time high back in November 2021 is now down by more than three quarters as of November 17.

Backup Your Transaction Records

Regardless of wherever you are holding your crypto assets, experts suggest downloading your transaction history periodically.

Just in case an exchange closes down you might still need those records to file your return.

This will also help in tracking your profits and losses throughout the year.

Expect More Regulation

There already have been talks about crypto regulation and classification and it has intensified after the fallout of FTX.

If you ask me about regulations, I do want these crypto exchanges to be regularized as you can't just run away drowning people's hard earned saying, well, we are bankrupted.

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Trully speaking, diversification is important, for investors who pumped in thier hard earn funds into FTX to make huge profit probably may be regretting thier actions.

This article is highly education as regards crypto investment. Thanks for sharing.

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People need to start learning to invest the amount they can afford to lose and to diversify their investment portfolio. It's the right strategy for every investor out there.

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Diversification is important but I think managing risk is probably the biggest thing people can do. From what I see in the FTX, a lot of the exchanges had their hands in too many pies and they lost some money due to it. It makes me wonder what will happen but I am kind of sick of the media trying to downplay FTX and SBF in the news.

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  • Use decentralized exchanges and trading platforms every time it's possible to do so...
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