The effects of the situation with FTX are sending shockwaves through the cryptocurrency industry. It is hard to miss what is taking place. Billions are at risk with another firm looking like it is going to face bankruptcy.
We are seeing many people learning a hard lesson. Not your keys, not your coins is a saying that extends back to the earliest days of this industry. By trusting centralized entities, we enter counterparty risk to the equation. Repeatedly, we see this step up and bite people.
Storing coins and tokens on exchanges is a great way to get oneself in trouble. The laws concerning cryptocurrency exchanges is different as compared to, say, stocks. If a firm does go under, one becomes a plaintiff in the bankruptcy filing. He or she is no different than any other creditor. One's assets are for the court to decide. Do not believe you can withdraw them like you can from other entities.
Alas, we see people making the same decisions.
The challenge is that, when scanning the cryptocurrency headlines, we are led to believe that cryptocurrency is going away. Just like the Terra-Luna situation, the typical FUDsters are out in force.
For this reason, it is best to step back and ground ourselves. A bigger picture is always helpful.
This Is Not The End
As FTX continues to face implosion, the crypto markets are going for a ride with it. However, do not believe this is the end.
Market price is not reflective of what is going on with the industry. Instead, we have to focus upon what is being build as the answer to this chaos. That said, we can learn some valuable lessons from situation such as this. Apply the lessons and we will find ourselves in a stronger industry.
The main problem is the one we faced all along. Since the overwhelming majority of crypto participants only care about price, we are confronted with the fact that extreme greed is running things. This is evident at every level. People focus on price, deeming that the metric for all.
Lambos and mooning are still the primary focus. When taken to the level of these companies, we see how leverage and other risky behavior is undertaken in an effort to maximize returns.
In this regard, people are acting like bankers. That is the sole concern of these financial institutions, nuking the economy on numerous occasions without any penalty other than some fines. Remember, bankers never end up in jail. It is unlikely that crypto people will be so lucky.
Like storing digital assets on centralized exchanges is a lesson unlearned, the focus upon greed follows a similar pattern. We can only hope the masses start to understand the implications of their actions.
Nevertheless, do not believe for a second that this is the end of cryptocurrency. It is not even close. As long as there are some builders to fall back upon, we will see the industry grow.
Decentralization
We discuss the Eurodollar system and the blueprint it provides for cryptocurrency. Here we have a global system that operates outside the reach of any government or central bank. It was established by the banks as a way to get around the central bank system of money which was limiting on an international scale. Basically, where the system was constrained, the bankers developed around those flaws.
This is what decentralization allows. While the Eurodollar system is not open, it is decentralized. Ledgers are run by numerous participants around the world. We can think of this like a number of blockchains. While there is no overriding ledger, each maintains the information that is pertinent to it.
Notice how much of the disruption to the industry in terms of the headline trainwrecks all stem from centralized entities. This should be something everyone in cryptocurrency should be pointing out.
Like Mt. Gox, these companies will end up as a footnote in history. They will not take down the industry. Instead, it is simply a clearing out. There are many people who are watching this and taking note. Their role is to develop around this and that is exactly what they are doing.
Confidence comes from understanding the vulnerabilities that exist and how to protect against them. Decentralization is a powerful mechanism in this battle. It is something we touch upon consistently because it is the core of what is needed. We all know the dangers posed by the centralized financial system. Unfortunately, many were willing to adopt the same structure in cryptocurrency.
This is now biting us in the caboose.
Just Noise
Over the years, we will find this is just noise.
Think back to the bursting of the ICO bubble and the ending of that craze. Many thought it was the end. What ensued was more development that provided an even greater run going forward. This brought us concepts such as DeFi, NFTs, and DAOs. Unfortunately, these were infected with the greed factor, creating another bubble.
And so it continues.
With the clearing out of the excess, which is exactly what bear markets do, we see the builders still going forward. These are the projects that will be the next "winners" when the bull market takes over. Many will be amazed how they appeared suddenly, a reality that we know to be different.
Noise instills fear in people. It makes markets crash and puts participants on edge. The long run reality is that, if the industry survives, these periods only provide strength. Getting rid of the insanity is imperative.
There is no secret of how success is achieved in this realm. Those who allow outside noise to dictate what they do end up losing. It is really that simple. For those who are able to separate that from what is really taking place, and focus upon those projects that are building for the long term, it is rather clear where success comes from.
This is not rocket science. It does, however, require one controlling his or her emotions, something that is rather difficult for the masses.
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Just when you think that the crypto scenario can't get any worse, something bad just pops up out of nowhere, another bloodbath.
Around mid-way of this year it was Luna and now FTX, who knows what 2022 has in store for us. Only God knows how 2023 will turn out. Nonetheless, if people do decide to stick around and invest, then this is a good time to accumulate and grow. I myself have been trying my best to "fill the bag" with more Hive, keeping some in "liquid" form as well. Hopefully I'll get a handsome return soon enough, and then go ahead and power up some more.
2022 surely has been quite a learning experience for me, especially in the crypto realm. One thing that I learned is that almost anything is possible in crypto right now, so we'd surely be better off playing safe, than being sorry.
People are going to have to be judiscious with the projects they get involved with. Hive is something that has a powerful future in my opinion. For this reason, I keep stacking as time passes.
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Very, the current prices may seem intriguing, and will surely pull people towards the crypto realm for some juicy and quick profits. But in terms of growth and the long game, you just can't be too sure with 90% of the projects, not after what we've been through this year.
We are in Hive and know what's going on, also who and what is behind it, the backing is very strong and we have a community full of believers, and that is why we are confident when it comes to Hive and its future. If we look at Hive for the long run, then I see nothing but growth and development. The progress and process may be slow compared to the others, but from my experience, I've never really seen a steadily progressing project fail.
That is why is important to stay for the long-term and follow the builders. Use the projects that bring real value.
That is my outlook. A lot of these situation are going to occur. That said, we have a tremendous future, we just need to build it.
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Just curious, did you watch the NOVA episode that I talked about in my latest post? It was pretty good. Probably a bit untimely that it was scheduled to air right after the proverbial shit hit the fan with FTX, but it was still really interesting. They talked about the history of money and state banknotes and stuff which I thought was a good touch. If nothing else but to point out things we think have always been a certain way haven't actually been like that.
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No I didnt have a chance to look at it. It is true that things change and people need to keep up on the differences as they happen.
Innovation never stops. I am going to do a post later that talks about society and how this happens. It if often unnoticed.
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Very cool. I will keep an eye out for it!
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The more centralized the project the more likely there will be fraud. Then you'll have the center guys claiming they have all kinds of assets to backup their lending when there is nothing but empty space.
We certainly see our share of fraud and theivery.
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I'm going to venture a guess that this is all just part of the coming-of-age of an industry. Remember how big failures of 20 years ago... like a "pets.com"... also resulted in haircuts for Yahoo, amazon, eBay and the likes? Along with talk that the whole ecommerce thing was just a "passing fad."
We pretty much have to go through a phase where the focus switches from running on hype to running on the substance of what this technology offers... how long that might take remains to be seen...
Yeah we have to endue these times. There are going to be many failures, likely more than successes.
Yet it only takes a few of the latter for an industry to explode.
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Crypto peeps are hard learners, although oftentimes they portray themselves as the opposite. The game is not over, but if it wasn't for this FTX saga, considering that the s&p500, gold, and silver are rallying, BTC could have been somewhere around $25k now.
People, remember!!! Don't listen to the paid crypto influencers, DYOR and what better place to get your credible crypto information than here at Leofinance
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100% spot on. People never learn. They keep on patronizing these exchanges.
Many has learn a lesson and the will be careful, your post is very interesting, thanks so much for sharing this amazing post
Yep.. excahnges come and go, men rise and fall, financials and the system live on...
... crypto will be here next year when SBF may be famous or infamous, he can't destroy something bigger then himself.
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Giving a thought to the end of cryptocurrency is not understanding the concept and technology in the first place and therefore one needs to go back to basics to get educated, what we are involved in is not only price dependant.
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If they are not your keys, they are not your funds. Definitely you have to learn that leaving money in an exchange is not the best option, many of us know that but maybe we fall in love with a project and trust so much that we forget that in the crypto world anything can happen.
It seems that it's my first time reading a description that the Eurodollar system is decentralized. Interesting analogy.
I think the popular saying "what doesn't kill you makes you stronger" is applicable to cryptocurrency.
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It's not rocket science but the businesses that don't have a sustainable model will just disappear. I guess it's more like the fear that crypto will all go up in flames and I have seen more than a few FUD videos like that so far.
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