Some have heralded that cryptocurrency is the future of digital payments, without the overhead of a central bank or government. However, at least some overhead may be needed, if the past few weeks have been any indication.
The current chain of events began with the collapse of FTX, a company that operated one of the largest cryptocurrency exchanges in the world: it had a partnership with GameStop and an announcement during the last Super Bowl. However, after reports emerged that the company was billions of dollars short, it filed for bankruptcy. The new CEO in charge of the FTX turnaround called it “a complete failure of corporate controls.”
Like the non-crypto financial system, other cryptocurrency exchanges and lending companies invest in each other, so the FTX crash has brought other problems. The Huobi exchange told shareholders that it had $18.1 worth of crypto assets tied up on FTX. Multiple crypto exchanges have stopped customer withdrawals because they don’t have the money, including Genesis, Digital Surge, and Coinhouse. Bloomberg reports that Genesis, another major exchange, may file for bankruptcy.
The crash has understandably eroded more people’s trust in cryptocurrencies as a whole, crypto or not, if you put your money somewhere and can’t get it back later, that’s a big deal. Bitcoin has lost 16.2% of its value in the last month and 71.43% in the last year. The value of Ethereum has decreased by 9.5% in the last week.
If you’re determined to stay in the crypto ecosystem, it might be a good idea to transfer (at least part of) your funds to a hardware wallet, where an exchange can’t use it as a slush fund. However, your crypto is likely to continue to decline in value.