Is there a positive side to the FTX crash? Whether yes or no, there is certainly a lot to learn from it.
2022 was a tough year for crypto, and November was especially hard on investors and traders alike.
While it was incredibly painful for many, FTX’s blowup and the ensuing contagion that threatens to pull other centralized crypto exchanges down with it could be positive over the long run.What people learned, albeit in the hardest way possible, is that exchanges were running fractional reserve-like banks to fund their own speculative, leveraged investments in exchange for providing users with a “guaranteed” yield.
Somewhere across the crypto Twitterverse, the phrase “If you don’t know where the yield comes from, you are the yield!” is floating around., and it’s proven true for centralized crypto exchanges and platforms, too. Who would have known that a few ill-timed bank runs would pull down the entire house of cards by proving that while exchanges appear to have high revenue and tons of tokens on their books, many are completely unable to meet user withdrawal requests?They locked your coins in centralized DeFi platforms to earn yield, some of which they promised to share with you.
They placed user funds, along with their own reserves, into illiquid assets that were hard to convert into stablecoins, Bitcoin (
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