Steemit Crypto Academy Contest S6-W2 | Centralized Cryptocurrency Exchange Platforms and Its risks
Hello Everone.
I hope all of you will be fine and healthy and enjoying good health with the grace of Allah Almighty. My Name is Ali Hassan and today I am again going to participate in Steemit Engagement Challenge. So, this post is about my participation in the Contest of week 2 which is being held in #SteemitCryptoacademy and our topic of discussion is Centralized Cryptocurrency Exchange Platforms and Its Risk.
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I am 110% agreed with this statement. If you haven't had your keys to your wallet then it means you haven't had your assets in your hand and in the case of Centralized Exchanges all of your assets are at the risk and the trust of the owner of the Exchange. If the owner wants he can freeze your assets even he can suspend your account and can also suspend your withdrawals for any reason or no reason because they have full access to our wallets and our access is dependent on the approval of the exchange owner.
Centralized Exchanges not only rely on the commision they earned through our trades as a fee they also use users' assets in trade and make Millions of dollars through it.
And if we move toward Bankruptcy then I want to first clarify the image of what actual Bankruptcy is. This is the term used when a bank makes continuous losses and mismanages the funds of the user and a condition arrive when the bank is unable to secure and provide the user funds they deposited then in that situation a bank is declared as the bank is Bankruptcy.
Now I want to explain Bankruptcy in respect of Cryptocurrency. First, don't move to a higher level first start from a user. As we all know all the major Centralized Exchanges provide High leverage to their users a user borrows an amount on their initial capital and the exchange shows him a price at which his account or his trade will be liquidated. It means that if the user is unable to maintain the leverage amount and his loss is coming more than the amount he deposits to fulfill the loss he has done in the borrowed amount his account will be washed.
In case of future trade, the Exchange manages the loss that the user done in his trade by taking all the money in his account which he reserves for liquidation but what will the scenario be when an exchange uses a users amount and trades with it and his trade gone wrong in that situation the Exchange doesn't fulfill the loss and declared as Bankruptcy because they are unable to pay back the assets a user deposited in his account.
So, it is clear that Centralized Exchanges are risky to use as compared to Decentralized Exchanges. Centralized Exchanges have full access to the user's assets and they can use, freeze and suspend any user account at any time while decentralized exchanges provide full access to the user and they can't manage users' assets.
- Why FTX bankrupt:
Technically if we take a look at all the scenarios then we can find that there were a lot of things that directly matter in the bankruptcy of FTX Exchange. Like 1st and the most important thing was the environment that create when users came to know that FTX is going to bankrupt in the near future they tried to sell their coins and most of them try to transfer their assets to decentralized or some other exchanges that exert an immense out pull of assets on FTX Exchange which their team poorly manages.
The second thing that I want to discuss with all of you is the Clash of CZ with Sam Bankman-Fried. As all of us know that Binance was an early and Strategic partner of the FTX Exchange and Binance puts Million of Dollars in Investments in FTX Exchange Sam Bankman-Fried also Invest in BNB and Binance but after some years when FTX start competing with Binance, there was clash occur which upset their partnership.
Now few days before CZ use Twitter as a tool to bankrupt FTX Exchange by saying that Binance is going to sell all their FTT(the coin of FTX Exchange) so they can prevent themselves from the case they faced in LUNA. As, Cz tweeted there seen a sudden drop in the FTT coin, and the coin drop its value by 10%.
CZ Continuously post about FTX Exchange and told that FTX is working against Binance and they don't want to help and work with FTX Exchange anymore.
Then after a few days, we see that CZ offers that he wants to buy FTX and will also help FTX to build it again. I think the Role of CZ was very important in the bankruptcy of FTX Exchange.
Besides these, there were a lot of other reasons which lead ftx and ftt to about dead and a competitive exchange was declared bankrupt. One of the reasons is FTX Exchange is known for providing high leverage Margin trade. They mismanaged their funds as users took too many leverage trades and high leverage Trades are always risky and most of their trades gone wrong. FTX Exchange leverages and this thing lead them to be declared bankrupt.
FTX Exchange unable to manage funds and mismanagement is the major reason behind its bankruptcy of FTX Exchange. As they provide high leverage on their own coin users short the coin in a panic situation which also leads them towards bankruptcy. When the price of FTT starts dumping and Big whales like CZ announce selling off their FTT holding a panic about FTT creation in the community and users start selling their coins and most of them try to withdraw all of their coins to some other exchanges.
In short FTX mismanagement, High leveraged Margin trades, Big drama with CZ Binance, and the Dumping of FTT lead them towards bankruptcy and when they make too much loss that they can't even pay user back they delivered as bankrupt.
- How did I find it? And other related consequences Related to it:
I am also a holder of FTX coin because I believe that it is the second BNB and I mostly check my wallet and check their worth in USD. As I checked that there is a gap of 15% that sees few hours before I become worried and when seeing the FTT/USDT pair I can't belive and I was unable to understand what is happening. I open Twitter and I already followed many Crypto related Accounts. I found there that FTX is about to bankrupt. Then I searched on google and see what is happening with FTT. There were hundreds of meme trending about FTT Token. I finally realized that this is happening as we see in the LUNA case.
The bankruptcy of FTX Exchange has strongly impacted the whole Community and the belive of Centralized Exchanges is no more after this incident and the hatters of Cryptocurrency get a chance to troll cryptocurrency. This Incident will also impact the new investors and this year we see too many problems like LUNA Crash and now FTT and FTX.
I who am a strong believer in Cryptocurrency am also afraid about the future of Centralized Exchange. I know it is risky but I can't imagine an Exchange can collapse like theirs and that exchange whose no is counted as the Number one Exchange.
FTX and FTT left a bad impact on Exchanges and also on Cryptocurrency. New Investors will avoid risk and the speed of innovations that we may see in the future may affect. Hundreds of new projects will face a low funds problem because the trust of the community is badly hurt.
I am a strong believer in Cryptocurrency, I'm not those who are saying Crypto is about to die and this is the ending of the journey that bitcoin started in 2009 and we will see bitcoin to $1. I think these people are those who don't know much about Crypto and they are unaware of the fundamentals of the future. They just step into the Crypto world just to see other people making money and they trade with no knowledge when they see they are not making money instead they claimed loss they start speaking against Crypto.
This is sure that FTX and FTT left a significant impact on the market but I think the market will again pump and the market is under struggling just coz of too much bad news in the market when the market will start showing Green candles we will see again a high inflow of Volume and the FTX and FTT will become history.
I think Bitcoin doesn't have any effect due to recent events because Bitcoin is the dominant coin in the market and people have strong beliefs in it. There are thousands of accounts that hold Billion Of dollars worth of Bitcoin and they don't want to sell it. The view about Bitcoin in the community is that it will be $100k in a few years.
Although we see a decline in the price of Bitcoin after this event bitcoin is now recovering slowly and I hope good news in the market can pump it again. The environment created in the last few months is a little bit difficult for new and old investors to believe in Crypto but good news can initiate the whole market.
Cryptocurrency Investments are always subjected as risky Investments you can double your capital within a day or half and you can lose your whole amount within a minute. Crypto is highly volatile and I can't say it is unstable because this volatility and decentralized nature is the actual beauty of Cryptocurrency and blockchain.
Funds are created in the market just coz of the mindsets that anti-crypto have. Cryptocurrency is the most convenient way to pay anywhere in the world within the blink of an eye. I don't think Crypto is outdated and is not suitable in the current age.
The thing that crypto really need is the support of the Government. If governments start supporting Crypto and making laws in the interest of there citizens about crypto then I think crypto is one of the best invention in this era.
Binance decide to buy FTX and they also assure that they will help FTX to rise again but I think once an incident about something happen the mindset of investors about it is updated. Like In the Case of LUNA, We haven't see a good return in form of LUNIC and I think like me most of the investors are not Intrested in new Form of LUNA. Same is the case with FTX and FTT, as Binance is a big name, Its title with FTX can built it again and I think Binance has much power and investment to do this but as I already mention Binance is also a reason behind this collapse.
Binance creates a panic situation about FTT by tweeting they are going to sell their FTT and relate it with LUNA, Actually, CZ plays a game to buy FTX at a low price by making it bankrupt.
Some good news about FTT was also seen when it was in trouble but they can't pull it back. I hope good news comes for the FTT investors but I don't see a bright future for FTX even if CZ purchases it. But the raise in the price of FTT can help the whole market to come back from this situation and can create a good environment and can help to build up the trust of new investors.
I hope the clash Between CZ and Bankman Fried comes to end and they both work together as they work in the early stages as a strategic partner and investor.
Cryptocurrency as well as Centralized Exchanges are very risky. I think users should try to come towards a Decentralized system because there is no risk of fraud and the risk of hacking can also be reduced there. The bankruptcy of FTX Exchange and the Poor Collapse of FTT left an unbearable mark on Crypto Community. Unless until Government make a strong rule and regulates Centralized Exchanges it is better to avoid them.
Crypto and Bitcoin will rise again and will make their all-time high. This situation is not for all time and crypto is not going anywhere. It is the demand of the current age and it fulfills all the requirements and it's a financial realm in the financing sector.
I would like to Invite @crimsonknight, @gust.art, @leicorp1 and @katherine012 to this amazing and interesting Contest.
Dear @cryptobitcoins,
Your post is very much informative for me as I have learnt many new things about the current conditions of the market and this is the result of your hard work in creating this post. The situation of the bankruptcy of FTX exchange is very much bad as it lead to the mistrust about cryptocurrency among the investors.
That's exactly what we all are hoping for. Although, the incident created a very hilarious situation among the investors but they can never ignore the benefits they have to enjoy just because of the cryptocurrency innitiative.
I wish many success for you in this week of the contest.
Thank you so much brother for a comprehensive comment. You're appreciation means a lot to me.
I agreed also with what you have discussed in the first question, but honestly, in my own case I think it wouldn't be too nice for Investors to loss their funds once a company has gone bankruptcy. If that is so some company may likely declare themselves bankruptcy because they want to go away with Investors funds.
Yes, you think accurate.
Wow, what a wonderful understanding over the topic. You have really done a great research work in accomplishing this task and your time is always highly appreciated.
Well, I strongly agree with you here. Yes, the centralized exchanges are always at the risk of frauds if the company wanted to do it. There are no private keys involved in the security of the assets so they are always less secure and private than the decentralized exchanges and wallets.
Right brother. Actually, these types of incidents are the exact reminders of the high risks and volatility that are always linked to the cryptocurrency market. We can never ignore the benefits that we get from the concept of cryptocurrencies.
Cryptocurrency is too much old as there are only created 11 or 12 years ago. We all know that every new thing need some time to flow in the flawless way so the same is the case with the crypto. The future of it is going to be very bright.
Thanks a lot for your beautiful participation in this contest. I wish you a very good luck for it. 🤞
Thank You so much for such an excellent comment on my Article.
I must commend that you have done justice to this task dear friend.
Lack of Decentralization Leads to Inefficient Markets
It is no secret that the FTX exchange, one of the leading cryptocurrency trading platforms, recently went bankrupt.
The traditional centralized exchange model simply cannot handle the volatility and liquidity of cryptocurrencies, leading to inefficient markets and ultimately, bankruptcy.
Unlike centralized exchanges, decentralized exchanges are built on blockchain technology, which means that all transactions are recorded on an immutable public ledger.
Thanks for sharing friend, and goodluck in this contest. #steem-on.
I will appreciate if you equally engage on Mine
Thank for reading and such a detailed comment on my article.
That was such an informative writing.
I agree with you on this, many laws are again crypto, it will be great to have some of the legislature going in favour of cryptocurrency
@cryptobitcoins
You have really explained your details so expertly. I really enjoyed visiting your blog. I was really captured by these wise words o yours.
You gave a good explanation, volatility is indeed the beauty of the cryptocurrency. It must be analysed and studied properly before venturing. Those are top notch points you relayed to us. I pretty do enjoy how you explained in details. I look forward to seeing you in the next contest. Loads of success too #steem-on
Thank you or such an impressive comment. Your comment means a lot to me.
You have written well on this topic my friend, truly, once something like this happens, i'm talking about the case of FTX, it will be difficult for previous or new investors to trust anything coming out from the platform again. People are scared already and some believe that it will be same as the case of LUNA. I wish you success in this contest my friend.
You're right that people are scared and I think so I am also scared about FTX and FTT. But Thank God i haven't put anything in FTX and I already sold my FTT at good price.
Thanks for your wishes and kind words.