Steemit Crypto Academy Contest / S6W2- Centralized Cryptocurrency Exchange Platforms and Its Risks
WHAT IS THE MEANING OF CENTRALIZED EXCHANGE IN THE FIRST PLACE
Moving on to the question, which is in a case of a bankruptcy individuals who owns cryptocurrencies may find out that the assets or cryptocurrencies will be no more theirs. This question will first have to do with the legalization of cryptocurrency. As we are all aware that cryptocurrency is not a legal tender for monetary transactions in most countries. Which is to say it is not yet legalized. So the cryptocurrency not being legalized does not fall under the bankruptcy law. This means your cryptocurrency assets can’t be protected in a case of a bankruptcy. So this is telling all cryptocurrency investors that there is a risk involved with the investment of cryptocurrencies. Also investors should be aware that in a case of a bankruptcy they might lose all their assets. With this said, i believe in the saying that cryptocurrency investors may lose all their assets in a case of a bankruptcy.
WHAT THEN IS BANKRUPTCY
The FTX is one of the trading platforms which has recently faced some major financial challenges. To the extent that they went ahead and sought out for bankruptcy protection.
The main reason for the collapse of the major exchange was due to the fact that, the exchange’s users was in fear of them loosing their assets after the exchange has lost many money, which they claim to be a hack. There is also an issue of the mismanagement of funds by the FTX exchange, which led to the loss of money. The traders lost their assets and the FTX exchange as well.
After the incident of the exchange’s claim of being hacked, it then began to put the traders of the exchange in doubt whether the exchange had enough or sufficient fund to keep the exchange running.
Over leverage could also be one of the main factors to the exchange’s bankruptcy.
Also, the exchange has agreed to sell itself to the Binance exchange. But something came off which rendered the deal not to be a successful one.
From sources on the internet, it is said that the hedge fund run by Bankman-Fried, holds an unusual large amount of FTT token. Bankman later created FTX to run his busses. But due to how the two were set up, one of the coin began to drop drastically. Which then begun putting fear in it traders.
Also the CEO of Binance was also holding FTT tokens, which he came out and announced that he had wanted to sell it. These two factors resulted to the exchange’s traders running out of the exchange.
One of the worst things one could think of happening to the cryptocurrency world is that the investors as i earlier said will loss confidence in the crypto investors. Some i might say will even go to the extend of withdrawing all their crypto assets from whatever exchange they are working with. Which would then have a bad influence to the crypto market or world. This is because the value of the cryptocurrencies will decrease. Most especially the popular and major cryptocurrencies like Bitcoin and Ethereum. Whenever these major crypto coins are affected, all the other coins too will be definitely affected. That is they will also loose their value.
But we have to know or keep in mind that this is an issue with an exchange. So it impact to the cryptocurrency world is not guaranteed. So what investors need to understand is that cryptocurrency has come a long a way and the collapse of one exchange can’t determine the future of cryptocurrency. All that investors need to do is to invest with a trusted exchange they think has a good plan and vision for them.
So whenever there is a bankruptcy in the crypto world there is no assurance of help from the government at all. With government not backing cryptocurrency or hasn’t accepted it yet as a legal tender doesn’t make it outdated or unstable. What is needed to do for cryptocurrency to get a collateral is for the governments to accept it first after which something can be done about the collateral. Also if the government is to accept it as a legal tender, it might not be decentralized as the main aim or goal of cryptocurrency is to be decentralized, that is from how it was being invented.
To predict the future of the FTT token now will be difficult. Which is because the FTT token still has utility.
As for the future of the FTT token, it is still too early to say. The token does have utility on the FTX platform, so it is possible that it will maintain its value. The only unassured thing is that whether Binance will delist the token. Even though they are saying there wouldn’t be any changes done to the FTX platform or it coin.
In conclusion, we need to first of all understand that what happened to the FTX exchange can happen to whatever exchange one is trading on. So all we have to do is to invest what we can afford to loose. Also it will be best if our crypto assets are kept on decentralized exchanges which permit us with the full access to our assets.
Hey Brother, I am fully satisfied with this statement.
Mismanagement of funds is the main reason behind the collapse of FTX Exchange. They put their funds at risk and lost them and as you mentioned the assets you kept in Centralized exchange are not your own and in indirect way they loss the users assets.
Good luck in this contest.
Exactly
Dear @habdallah,
There are many cool points that you have mentioned there in this post and they are really useful.
The bankruptcy incident of the FTX exchange has made the crypto against agenda more strong than before.
Yes this is actually the main problem that the government of different areas are not longer accepting it legally. But they have to adopt it because there are many benefits that will surely impress them one day.
I wish many success for you in this week of the contest.
You have written this post in a very good way. I really appreciate you way of expressing the ideas about the topic of this week.
Bankruptcy in the cryptocurrencies is a term used when there is a complete seize of the funds that are present in the wallet of an individual. Liquidation of assets in the margin trading could be a type of the bankruptcy.
Yes brother, you have said very truely that there is no back up for the cryptocurrencies by the government and the main reason behind this is the anonymous nature of the cryptocurrencies technology.
Thanks a lot for sharing your Quality post with us and wishing you a very good luck for the contest 🤞.
Yes you are right too
You are always given us love and interesting article dear friend, and I commend you for that. I have picked out and learnt very valuable things from your article friend.
In a decentralized exchange, there is no central authority controlling the transactions. This leads to more efficient markets, as there are no gatekeepers that can artificially restrict or control the price of a currency. Instead, market participants interact directly with each other to set prices and execute trades.
This provides an added layer of security and makes it harder for malicious actors to take advantage of the system.
Thanks for sharing friend, and goodluck in this contest. #steem-on.
I will appreciate if you equally engage on Mine
You have written well my friend on this contest, if Binance should go ahead to buy FTX, it will reassure the previous investors and also win back their trust since Binance is one of the well known and most trusted centralized exchange. You have written a great piece here my friend. I wish you success in your entry.
Exactly