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Lessons we learned from the Terraform-FTX implosions

Cryptocurrency Dec 09, 2022 09:00PM ET
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In May 2022, Terraform Labs’ LUNA cryptocurrency and TerraUSD (UST) stablecoin collapsed, triggering a massive shock in the crypto industry. Six months later, the bruised industry took another hammering as one of the largest cryptocurrency exchanges, FTX, filed for bankruptcy protection and billions of dollars of user assets went missing. The FTX empire, once valued at more than $30 billion, fell to zero in fewer than 10 days.

FTX reportedly has more than 1 million creditors, most of whom are retail investors who were convinced that FTX would not collapse and had been keeping their assets on the exchange. Taking a look at Mt. Gox in 2014 — whose creditors still failed to reclaim compensation — FTX may be a repeat of that mistake.

  1. If you hear any rumors about the insolvency of an exchange or a project, be sure to transfer your assets out as soon as possible. As an old Chinese saying goes, a true man won’t stand beside a collapsing wall.
  1. Not your key, not your coins. This is a cliche, but it is also a truth. The only way we can protect our crypto assets is by keeping our own private keys.
  1. Cash is king when a crisis occurs. As bubbles burst and asset prices plunge, holding cash can make us safely survive the difficult period.
  1. Don’t borrow money to invest, and don’t leverage. For most people, borrowing and leveraging will only accelerate bankruptcy. FTX was not immune to this.
  1. Keep up with the industry by learning new things about centralized finance and decentralized finance, tokenomics, on-chain activity, how to use cold wallets, etc.
Tracy Zhang is the CEO of Cointelegraph Chinese. She graduated from Zhengzhou University before attending Paris-Sorbonne University for French Studies.

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Lessons we learned from the Terraform-FTX implosions

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