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Main Takeaway: Crypto Contagion Returns
After a relatively quiet few months, a new wave of crypto contagion has returned, with this time the world’s third-largest exchange falling prey to insolvency. FTX has finally gone under by being over-leveraged on insolvent altcoins and not having the reserves to service customer withdrawals, thus falling prey to a traditional bank run. This is very unfortunate for the industry short term, and that’s why it’s important to use exchanges that are trustworthy and that don’t take your coins and loan them out or trade them in volatile assets. The importance of cold wallets and private keys can not be overstated.
As a result of this unfortunate tragedy, the crypto market is down 10%, thus resembling a sort of “Lehman Brothers” incident. This is extremely bearish short term, but hopefully, bullish long-term as the industry washes out the bad actors.
