The bankruptcy of one of the largest and most influential cryptocurrency trading companies, FTX, shook the entire cryptocurrency market, and some experts even began to predict the collapse of this line of business.
The blockchain technology on which cryptocurrencies are based was first described back in 1982 in David Chaum's doctoral dissertation. The currency itself has existed since 1997, when its first version - "B-Money" - was created. Even later there was Bit Gold, other currencies.
Bitcoin - the most famous and the currency considered the standard and pioneer of cryptocurrency - was created only in 2008. However, we can consider this currency as the pioneer of the virtual financial market, because it made us believe in the future of this instrument and attracted millions of investors to the market.
Today, despite the collapse of FTX and the sudden decline of the entire market after it, the total market capitalization of cryptocurrencies in the world is valued at more than 1 trillion US dollars, which is really huge money.
Today, cryptocurrency is a universally recognized instrument, traditional banks are already trading in virtual money, it can be used to pay for goods and services around the world.
Can such an old and large structure completely collapse? I don't think so. Even the catastrophic bankruptcy of Lehman Brothers, one of the largest US banks, did not destroy the global banking system or investment funds.
In the long term, this crisis will help the crypto market to become more stable, as more regulatory instruments will emerge, and people will increasingly trust traditional financial companies that include cryptocurrencies in their services and investment packages, rather than trading places dedicated to cryptocurrencies.
However, this does not mean that nothing changes. A few lessons learned:
1. Assess the risk
The exchange rate of cryptocurrencies is extremely volatile so far, and if you expect to win a lot in a short period, the risk will be very high.
Bitcoin rate from 2021 November, when a record 68 thousand was reached. USD limit, until 2022 November 17 dropped more than three times - to 17 thousand. US dollars.
That's still a lot more than $1, which was the initial exchange rate for this cryptocurrency when it first appeared, so you're likely to win in the long run.
2. Diversify your investments
Don't keep all your eggs in one basket - probably the oldest piece of investor advice. The only thing I could add to it is try to have more than just eggs.
Invest in different products in different places. This is a golden rule of investing that has been in place since before the advent of cryptocurrencies and has proven to be quite successful. Not only relatively new, but also time-tested systems are collapsing.
3. Look for safe storage areas
Store cryptocurrencies in several unrelated places - there are certainly many trading networks these days. Some of the cryptocurrencies you buy for longer holdings can generally be taken off the grid to more traditional financial companies like Fidelity for example.
Cold storage is becoming popular and so far the only downside to this method is that assets become less liquid and cannot be traded quickly. But some investments don't need speed.
4. Back up your transaction records
No matter where you keep digital currency, specialists suggest periodically downloading and saving your transaction history. This will help you not only to "feel the pulse", but also to make claims if any exchange closes.
5. Assess not only investment risks
When investing in cryptocurrencies, it is very important to keep in mind the other risks associated with this financial instrument. First of all, evaluate the origin of the received money very well. This is important when it comes to all currencies, but virtual money still remains in the high risk zone.
Another very important point is accounting. The number of legal acts regulating the accounting of digital money is increasing, the changes in the exchange rate are large, so it is very important to properly assess the taxes to be paid and accounting for the change in the exchange rate.
If you don't keep up with all the news related to this, be sure to consult with professional consultants who will help you avoid costly mistakes.