FTX’s fiasco has been a catalyst in helping investors understand the importance of a decentralized exchange. Some exchanges have refused to share their proof of reserves citing security reasons. Many investors have also dropped crypto like a hot potato owing to insecurity, doubt and fear of losing their funds to a centralized exchange.
While the market is facing a bearish trend there are a few platforms that are aggressively building better decentralized crypto solutions to help regain the investor’s faith. Also, the fall of these institutions is the beginning of a revolution in the finance and technology herald.
Crypto asset’s flashback story
We know how Bitcoin was born. While the world was struggling with the economic crisis, BTC was evolving and by 2019 it was launched as an open-source platform allowing anyone to mine Bitcoin with a BTC wallet and computing power. Later, a Floridian programmer named Laszlo Hanyecz ordered two pizzas for $ 10,000. In 2014, the market cap of crypto grew to $ 3 trillion and this year the bear cycle caused the market to plummet at $ 50 billion post the Terra Luna collapse.
To add fuel to the fire, Sam Bankman’s FTX collapse has caused a stir of anxiety in the minds of investors and institutions alike. The recent collapse of FTX has brought the market cap of crypto to less than a trillion dollars.
These bust incidents have caught the eye of the government and have called for a regulatory framework for establishing the asset class. Surprisingly the Fed and other concerned entities have called SBF and FTX for advice on the same. While this should have been the other way around. The current scenario of the crypto market must instill some suspicion for the government instead of showing excess confidence.
Additional Read: FTX Collapse
Are crypto market scams a big deal?
When the internet was developing rapidly there have been cases of scams and malicious thefts conducted on the traditional internet. The 2013 Yahoo privacy breach was the first incident of IP attack in the traditional web industry.
Secondly, the regulations applied on crypto assets will indirectly enable hackers and fraudsters to find more difficult patterns to attack and steal virtual assets. If a regulatory framework is set in stone for the industry then the investor may find himself in a soup if he is not well versed with the technology and the legal policy binding on it.
Custodial institutions like FTX, Voyager, and Three Arrows Capital have gone bankrupt owing to a miscalculation of their product and ledger book. This has left chills to investors and VCs. So the answer to mitigating these risks is to navigate the crypto landscape to maximum decentralization.
DeFi will eliminate many issues prevalent in the centralized crypto realm. From security to the transparency of users’ funds, DEX’s fit well for the market as of now.
Terra LUNA was a classic example of poorly designed management. Despite being a decentralized entity, LUNA’s collapse was primarily due to the firm not knowing how to steer its vehicle in the right direction.
Individuals are looking for a safer investment option to help them get returns on their liquid cash. But, the crypto market is here to stay. While there are some projects like Serum, Solana and a few others that may take a while to climb back to their positions.
Additional Read: Genesis Bankruptcy rumor drives Bitcoin Price below $16,000