It’s been a harrowing year for the cryptocurrency industry with some of the biggest players in the business collapsing under the weight of bad financial decisions (or outright fraud).
It’s the users who have paid the bill, however, with plenty of retail crypto investors getting their coins locked on exchanges with no way to withdraw.
What about crypto users with funds on exchanges that are still operating as usual? Well let’s just say there’s been plenty of renewed interest in the “Not your keys, not your coins” narrative.
Let’s take a quick look at how we got here.
FTX’s Former CEO Against the Crypto World
According to reports, it is now revealed that Tether executives and Binance CEO Changpend Zhao (also known as CZ) alleged that Sam Bankman-Fried (former FTX CEO) intentionally tried destabilizing the entire crypto market.
According to messages seen by The Wall Street Journal from a signal group chat named “Exchange Coordination,” CZ and Tether officials confronted Mr Bankman-Fried about trades made by Alameda Research.
Reports reveal that Alameda Research was focused on destabilizing stablecoins in a move that would have triggered a ripple effect across the entire crypto market.
“Stop trying to depeg stablecoins,” said CZ in a message on the signal group.
Before the fallout between CZ and Mr Bankman-Fried, Binance had agreed to bail out FTX from its liquidity crisis. However, Binance quickly exited its position after becoming increasingly uncomfortable with FTX’s balance sheets.
In a Twitter thread, CZ revealed that FTX was 1/10th the size of Binance yet they “outspent” Binance by 100/1 “on marketing and partnerships, fancy parties in the Bahamas, trips across the globe and mansions for all their senior staff.”
Before FTX’s move to file for bankruptcy, Mr Bankman-Fried criticized CZ for publicly reprimanding FTX amid their liquidity crisis. In addition, the former FTX CEO claimed that CZ was spreading rumours as the two engaged in a war of words on Twitter.
In his defence, Zhao said that Binance’s move to exit FTX’s bailout agreement and liquidate its FTT and FTX token holdings was a “post-exit risk management” strategy after the notorious $60 billion LUNA meltdown.
A Never-Ending Downward Spiral
FTX exchange and their FTT tokens are just some of the recently collapsed. Terra Luna’s network collapsed in September, whipping out $60 billion from the crypto market.
Terra network and its CEO, Do Kwon, quickly rose to prominence in the crypto space in a span of four years. The Terra network featured multiple moving parts, including two sister coins on the same network. One of the tokens, TerraUSD (UST), was designed as an algorithmic stablecoin backed by LUNA tokens (Terra network’s native coin).
Prior to its collapse, LUNA was valued at about $116 but dropped to a fraction of a penny. Since UST’s value was pegged on LUNA tokens using clever mechanisms to maintain its stablecoin status, its value fell after LUNA’s collapse.
After Terra network’s collapse, Mr Kwon was charged with fraud and breach of capital markets law and is reportedly hiding in Serbia. Authorities at the Seoul Southern District Prosecutors’office said they would work with Serbia to detain him.
BlockFi, Celcius and Voyager
Other centralized crypto platforms that have collapsed following Terra Luna’s and FTX’s meltdown include BlockFi, Celsius and Voyager.
BlockFi, a centralized crypto lending platform, declared bankruptcy following the collapse of the FTX exchange. Before FTX’s collapse, BlockFi’s chief executive Zac Prince had already announced the company’s financial troubles following the liquidity crisis triggered by Terra Luna’s downfall. BlockFi moved to sign a deal with FTX, thus injecting $400 million in loans into the crypto lending platform.
According to the deal, FTX had the option to buy Blockfi for about $240 million. However, even before the deal was finalized, FTX collapsed, thus triggering a bank run at BlockFi.
Another crypto platform that was caught up in FTX’s fiasco is Voyager.
At the tail end of September, FTX emerged as the highest bidder in a bankruptcy auction for Voyager’s assets. Voyager, a centralized crypto exchange, filed for Chapter 11 bankruptcy protection after July’s crypto market crash. Voyager’s collapse was partly caused by risky gambles on tokens by Three Arrows Capital (a so-called hedge fund). Voyager also had significant exposure to Terra network’s UST stablecoin.
Celsius, an experimental centralized crypto bank, also played a significant role in the ongoing crypto market crash, erasing billions of dollars from the market to the detriment of thousands of investors. As a result, Celsius Network filed for Chapter 11 bankruptcy on July 13th of this year, citing extreme market conditions.
Binance in Hot Water
Recent reports by Reuters also reveal that Binance (the world’s largest crypto exchange) is under a long-running criminal investigation that began in 2018.
Federal prosecutors involved in the case reported to Reuters that they have already gathered evidence focused on the exchange’s compliance with U.S. anti-money laundering laws.
According to market watchers, Binance’s grip on the crypto industry could reduce significantly if the investigation goes against Binance and its CEO.
Continued Confidence in Bitcoin
Despite the ongoing crypto market crash, there is continued confidence in Bitcoin among institutional investors.
Cathie Wood, Ark Invest’s CEO, recently made waves with her bullish stance on Bitcoin even as Bitcoin’s price dropped below the $17,000 mark. According to Cathie Wood, Bitcoin is primed to hit a $1 million valuation by 2030.
In a tweet, Wood said, “Bitcoin’s blockchain didn’t skip a beat during the crisis caused by opaque centralized players.”
She also alleged that FTX’s former CEO didn’t like Bitcoin for its transparent and decentralized nature.
Not your Private Keys, Not Your Crypto
In closing, despite the ongoing crypto crash, the familiar adage “not your private keys, not your crypto” rings true.
Recent events continue to highlight the need for decentralized non-custodial crypto storage solutions.
A non-custodial crypto wallet is a type of cryptocurrency wallet that gives users complete control over their private keys. Private keys are like the password to your crypto holdings, allowing you to access and manage your funds from any device.
The protocols, such as Bitcoin and Ethereum, have remained strong, despite the price downturn.
With a non-custodial wallet, you are the only one who has the private keys to your coins, so you are the only one who can access and manage your funds. This differs from a custodial wallet common on centralized crypto exchanges.
Therefore, now is the right time to consider using a non-custodial wallet as it is generally considered more secure.