How the FTX Collapse was the last straw for the crypto market to improve
After the halt to withdrawals and subsequent bankruptcy of Celsius and problems with other crypto lenders earlier this year, FTX collapse repeats an argument that was made following other cryptocurrency disasters.
There is still a concern in decentralized finance circles that centralized players should not be trusted with what are supposed to be decentralized assets.
“The FTX situation has put immense pressure in exchanges everywhere with users nervous about exchange holdings,” Ben Caselin, vice president at AAX, said.
Since many people have now begun to realize the inherent problems associated with trusted intermediaries, these major crypto entities will likely face intense competition from DeFi protocols.
“DeFi will usher in huge development opportunities. Custody services, transparency and top-shelf risk management policies will become the norm for centralized services,” says Gracy Chen, managing director for cryptocurrency exchange Bitget.
Most customers will find DeFi difficult to use, while pure CeFi will be difficult to trust. Solid exchanges can increase their stranglehold; however, we will increasingly see platforms combining both DeFi and CeFi. According to Julien Hosp, DeFi liquidity will no longer be confined to one dominant blockchain and will likely be spread across a variety of ecosystems and protocols, as has been demonstrated throughout the time this market has existed.
Changpeng Zhao, Binance CEO, admitted that centralized exchanges may no longer be necessary with self-custodial solutions gaining traction. “If we can have a way to allow people to hold their assets in their custody securely and easily, that 99% of the general population can do it, centralized exchanges will not exist or probably don’t need to exist, which is great,”
FTX’s disaster serves as a stark illustration of the dangers associated with storing wealth on nontransparent exchanges. The fastest solution? Cold storage and hardware wallets.
We’ve all heard of them … Hardware crypto wallets keep users’ private keys stored securely offline. “Not your keys, not your crypto”. Unlike software wallets, they’re mostly immune to online attacks, though they are not entirely penetrable and have been targeted by phishing attacks before.
Ledger had its highest sales in history this month. Now the company is rolling out its crypto debit card across the UK and Europe. With this card, users can transfer crypto between Ledger hardware wallets and card accounts using the companion app Ledger Live.
In the event that funds are spent, customers can receive 1% crypto rewards in bitcoin or USDT, or 2% in Baanx’s (ledger’s partner) native token BXX. Users can also receive paychecks denominated in bitcoin, ether or other stablecoins. Customers can use their card at some 90 million merchants and online stores accepting Mastercard across Europe and the UK.
Binance has also partnered with Ledger to allow users to buy crypto directly through their bank cards using the Ledger app. Binance is making a move in the hardware wallet industry. On November 21, Binance announced that its venture capital arm, Binance Labs, has invested in Belgian hardware wallet company Ngrave and will lead the company’s upcoming Series A financing.
It should be noted Zinder of Ledger has said that not everyone needs a hard wallet to store their crypto assets.
“There’s also plenty of healthy crypto native players out in the space, managing their businesses properly, having full reserves and managing their clients’ assets responsibly with the right governance and the right capabilities,”
In summary, the FTX collapse is the crypto winter consolidation. Throughout 2022, the price of all major cryptocurrencies decreased exponentially following the collapse of TerraUSD and Luna.
Due to money, market share and technological limitations, the core principles of crypto have been hazarded. Does it mean that crypto’s next phase will look different?
Our financial markets and technological advances have shown us ample precedents of crashes to know that when we learn from them and make significant changes, there is always a bright future ahead. A new wave of evolution will hit the crypto world. New standards will be set based on decentralization and transparency, leading to better regulations.
Furthermore, as users learn about better safety measures for their crypto holdings, companies will evolve and keep up with the demand improving their goals and giving new products.
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