Steemit Crypto Academy Contest / S6W2- Centralized Cryptocurrency Exchange Platforms and Its Risks
Hello everyone, how are you doing, I hope everyone is doing great, I welcome you to week 2 season 6 of the engagement challenge, and here I shall be participating in the contest discussion of "Centralized Cryptocurrency Exchange Platforms and Its Risks".
On this topic, I shall discuss the risks involved when you have assets kept in the centralized exchange and as well discuss the recent hit from the FTX exchange, Happy Reading!!.
This is a very valid statement as it is, and this occasion is likely to occur only in a centralized exchange, as we have always implied In the crypto world that, Not your key, Not your coin, the centralized exchange has the enormous power over any assets kept with them, as they have the central power and they are responsible and in full charge of your assets.
What happens in Bankruptcy? As we have seen recently that a popular cryptocurrency exchange just declared bankruptcy, which means they no longer have the amount that is being kept with them, it's of no surprise that the centralized exchange borrows the user's funds and makes profits with it, this goes both ways, where you are being provided with Leveraging as well, which means the exchange are entitled to borrow your assets, but what happens when this goes wrong, well, the bankruptcy does both ways, but the customers and the exchange take a hit from this.
So this statement is valid and which means the assets deposited are no longer theirs as they have relinquished the authority to the centralized exchange, and this is additional to the fact that there is no law protecting users' assets in a centralized exchange as we all know the risk involved with cryptocurrency, and there is no insurance or assets refund, so this is very a likely outcome and the exchange have the full control of power over users asset.
There are a couple of reasons accompanying the reason FTX go bankrupt.
FIrstyly - They are leveraging users' assets: This is a big slap on the exchange as it is totally against the trust the customers had with the exchange, this bankruptcy occur due to the fact that the exchange over-leveraged its customer asset with no backup or reserve.
Secondly - The Bear market - This is also one of the reasons the exchange went bankrupt, FTX is said to have lost a huge amount of money in the Bear market earlier this year, and with this, the exchange couldn't meet up with the withdrawing demand as there are said to be over 5$ billion dollar withdrawal per day from the exchange.
Thirdly - This is also the important detail on why they went bankrupt, FTX is leveraging its own token with customers' assets, Exchanges are not supposed to back their assets using the customers token, so in this case, when FTX token known as FTT started taking the hit, and there get to be a lot of selling pressure on this assets, this leaves investors hopeless and the coin took a large hit, coupled with the fact that is backed using their client's assets, they could no longer recover this till they eventually got liquidated.
How did I find it?
I got this information from a couple of memes circulating on Twitter, and also from the price plummet of the FTT coin which is the token backed by the exchange. so this made it so obvious and the news going around that SBF is in bankruptcy.
What are the other consequences of this accident?
The consequence of this is that we never knew the end, and this shows there are still more coming, the consequence is that this made customers lose their assets, this is one of the deepest cuts in most users, I personally never had an encounter with the exchange, but those who had invested or participating in the exchange lost some huge proportion of there assets.
This also leaves a bad reputation on cryptocurrency, as many already proclaimed cryptocurrency not to be safe, and this has made more people who are yet to invest in cryptocurrency lose their hope, and this could be huge to recover from.
Me being pessimistic is not possible, I am a huge fan of cryptocurrency and I still have a great belief in it more than anything else. cryptocurrency is capped at Trillion Dollars, and it has surpassed higher highs than any Financial Institution within the timeframe.
Many have been pessimistic about crypto lows as they believe there will be higher highs when we get to the bottom, many were expecting the lows, as we believe there will be more highs after this, and this is the next price frame we are expecting.
After the FTX crypto falls, there was a big capitulation, and this was the lowest bottom everyone has been calling for, but we are still expecting the lower lows, the important detail in this is to await new lows, which after, we expect BTC halving and then we can have a new bullish movement afterward.
The Impact this has on btc is not dynamic, 1BTC is always equal to 1BTC, only the fiat currency changes, bitcoin is still maintaining its impact in the crypto community, and the only difference is the price fall, many lows are already in expectance with or without the FTX incident, likely we may see new lows as there is still more capitulation to be expected, many were already predicting bitcoin to go as far as $14k, and this will be the end of the accumulation phase for BTC, then 2023/2024 we expect the new highs in BTC and altcoins.
Right from the beginning, cryptocurrency has been struggling with regulation and also struggling with being accepted in most countries due to its large volatility, but this incident has led to a big cut in this wound, many already view cryptocurrency as a scam, thus is equally surprising has FTX which is a Multibillion exchange went to a total bankruptcy till Zero.
This incident has led to many people and organizations losing hope of investment, the idea of cryptocurrency is supposed to be decentralized as Satoshi has aimed, but otherwise, many people went bankrupt and this is not due to cryptos fault but a guy's fault, and at the same time many will witness this as a bad way of investment, and since there is no collateral. and stability in the price of crypto, this could lead to a big setback in the cryptocurrency realm.
Binance decision to buy FTX is a great move, but this later didn't come to play, the FTX exchange was beyond saving says CZ of Bincnace, the exchange is said to be owing users multi-billion dollars, and the revenue is not enough to hold liquidity of the exchange.
Binance being the No1 exchange has proven more loyal and trustworthy since the previous days, recently binance announced a proof of reserve and also introduce proof of transparency, this has been reassuring for investors, but Binance had already backed down from buying FTX as the exchange can no longer hold enough liquidity to survive its downtrend.
What is the future of the FTT cryptocurrency?
FTT coin seems to have been delisted on Futures trading which means there is still a chance of recovery for the coin, the founder SBF is also under investigation and there has been news that there will be a total refund of assets to users in the US, and this will follow the claim as SBF is gradually recovering, they promised to return some of the user's funds in arrears.
Here comes my conclusion on the topic of The Risk involved in Centralized Cryptocurrency exchange, there has always been a say that Not your keys means not your coin, Cryptocurrency was meant to be decentralized and each individual should have control of power over their assets.
The centralized exchange came with more opportunity for users to keep earning more by leveraging their positions, but this goes both ways on some centralized change whereby they borrow users' assets, and might not be totally safe.
Thank you, everyone, for coming, and I hope you have a great day, I hereby invite @solexybaba, @josepha, and @Sahmie to participate in the contest as well.
Yes, I agreed with you that I don't seem any future with FTT coin it will be delisted from various exchanges and then it will loose more value and then it will extinct.
What a clear image you provide in this Article. I can understand each and every line and you conveyed it very well. That is appreciatale.
You're right that if one doesn't have a key he doesn't have the coins or the coins are not him. Centralized exchanges are very risky but provide some interactive offers and put some mind interactions things that bring us to a centralized exchange.
I hope that FTT will rise so we can decrease our loss. Government should provide some security in such a scenario.
Good luck in this Contest.
I'm not sure there's much government can do in such position, the only thing FTT could face is being charged with fraud and that's only if there's enough evidence for that, I was on SBF Twitter space yesterday, and most of his word were "I'm sorry", although he said they are working as much as possible to get user's there money back.
Centralized Exchange are very risky, they are just more easy and beneficial.
Right brother
Dear @badmus-official,
You have posted an article of top notch on the topic. I get many useful information from here and they will surely help me in understanding more about the topic.
Well said, the incident of the bankruptcy of a popular exchange just like FTX will surely create a very bad situation among the traders and companies equally.
Yes the people who are already against the cryptocurrency have now an example to support their mindset by keeping in view the FTX incident.
I wish many success for you in this week of the contest.
A well managed and the well expressed post. You have written very well as always. I like your way of presenting the ideas.
Yes, you have said well that it is one of the most important reason behind the bankruptcy of the FTX exchange platform. We all know that FTX platform was offering the margin trades with high leverages.
And when a token is leveraged with such high levels, there are many risks thay could lead to the loss for that token. The exactly same has happened with the FTT token and this is just due to the over-leveraging.
Thanks a lot for sharing with us and wishing you a very good luck for the contest ahead. 🤞
As always, you have presented another interesting and educative article for us this week my boss.
No doubt the recent incident involving FTX, has left many in the crypto space concerned and uncertain about the future of the industry. It reminds us that the crypto markets can still be volatile and unpredictable, and it has raised serious questions about security protocols and risk management.
The incident is a stark reminder that crypto markets can still be volatile and unpredictable, and it has raised serious questions about security protocols and risk management.
As the crypto space continues to grow and mature, it is essential to have stronger regulations in place to protect investors from future lost as this.
Thanks for sharing and goodluck in this contest friend.
Greetings friend, you have presented a wonderful entry in this contest, Binance movement to buy FTX could have been a great relief to investors but due to the amount of debt incurred by the exchange the deal couldn't pull through. You have made an excellent entry and i wish you success my friend.