Share: 10 lessons learned from the FTX debacle

The collapse of FTX sent shockwaves through the entire crypto industry.

This article summarizes 10 lessons I learned from the FTX incident that I hope will help you avoid future disasters.

1. Don't blindly hold

Periodically reassess your portfolio.

For example, take a look at your portfolio each month and ask yourself:

A: Why should I hold this token?

B: If I didn't hold it, would I buy this token now?

If you answered no to question B, then you should probably sell.

Remember, holding tokens is the same as buying them at a given moment (opportunity cost).

2. Nothing is too big to fail

As we have seen with LUNA (and now FTX), even the largest market players are prone to failure.

The echo chamber effect of encrypted tweets is powerful. Don't let other people's overconfidence affect your own beliefs.

3. Avoid unnecessary risks

In crypto, where there is smoke — there is often fire.

If there is any slight rumor that the exchange is going bankrupt - by all means withdraw your funds.

You are better off withdrawing and re-depositing than risking losing your coins.

Start by seeing FUD as real and working to prove it's false rather than immediately denying its existence because of pre-existing bias.

FUD will always be FUD until it isn't.

4. Not your keys, not your coins

Although a bit clichéd, this quote has value.

For yourself, store your cryptocurrencies on a Ledger/Trezor so you can sleep comfortably at night.

It is possible to trade on CEX, but please do your own trading and transfer your profits as soon as possible.

5. Start trading on DEX

If you want to avoid the risk of CEX completely, then you can consider using DEX.

There are many good places to trade derivatives such as GMX, Genesis, ApeX, etc.

You don't necessarily have to trade on a centralized exchange.

6. Consider the consequences

Whenever a black swan event like this happens, think deeply about its impact on related tokens (such as SOL) and the industry as a whole.

Events like this are shaping the industry and require you to think critically and reassess your biases.

Every crash also has a positive effect on certain areas/narratives.

For example, DeFi transaction volume is experiencing a boom.

See where the money is going next and act on it.

7. Act fast

When FTX started to crash, there was a huge profit opportunity by shorting the affected tokens.

Don't just sit back and be shocked if something like this happens again.

Adjust your theory based on the information available and trade realistically.

8. Look for flaws

When researching a coin/entity, we tend to only see its positive aspects.

• "FTX is a big exchange, they're not going to fail."

• "SBF is so smart, how could he fail?"

Instead, start by asking the hard questions, then look for the positives to counter the negatives.

9. Seek transparency

If a project/entity doesn't articulate exactly how their balance sheet/funds are allocated - please raise this as a major red flag.

For CEX - look for proof of reserves/liabilities.

In DeFi - looking for proof of treasury reserves.

10. Always have cash available

Just as getting out of the market entirely is not ideal, investing your entire sum is not optimal.

Always keep cash available to take advantage of new opportunities.

Those investors who have done so are now well positioned to accumulate at more attractive prices.

Most of these lessons have been conveyed by me for a long time, but given what happened last week, this is a timely reminder that we should revisit.