The FTX Collapse : Lessons To Learn For Investors

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. Source

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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