The story begins
FTX used customers' money to invest, causing a gap of 8 billion US dollars in funds. In just one week, users withdrew money due to panic. FTX could not withdraw so much money for users in a short period of time, so it suspended withdrawals. FTX's liquidity was known to users. The shortcoming is a fact. The price of FTT currency has dropped sharply, and the assets held by FTX are even less valuable.
If any exchange encounters a large number of user withdrawals and the liquidity exceeds the exchange's capacity, the exchange will collapse.
Mental journey
I originally thought that if my little Namihu was injured, more people would definitely die together. Those behind FTX would definitely not let it happen. But I didn’t expect that the second-ranked exchange would only take about three days from the time the news came out. Time has witnessed the fall of FTX
#I was not Rug because of my greedy pursuit of high interest rates, I was just pursuing stable interest rates.#Ijust put my fucking money on the FTX exchange, and I couldn’t get the money when I woke up the next day#ObviouslyI have not invested in the bear market Okay, why were I injured in the two incidents of UST and FTX? It was not because of trading, but because of liquidity runs.
Mentality adjustment
After facing huge losses, don’t trade, calm down, and try to keep yourself as normal as possible. As long as you still have capital, you can stand up.
Maybe I should be grateful that I encountered such a loss when I was young. If I had encountered such a risk in my 40s or 50s, I might not be able to stand up at all.
In a helpless situation, the victim will grab any driftwood in sight, making him particularly vulnerable to deception. In such a difficult time, he must always be vigilant.
current situation
The damage caused by the FTX incident is far greater than that of LUNA. Cash is king, not even a stable currency. In the current situation, it may be safer to switch to legal currency (Taiwanese dollars, US dollars)
When systemic risks occur, it would be better to keep a small amount of money in the currency circle and do the contracts on Binance.
How to prevent liquidity runs from occurring
If you encounter systemic risks, you should avoid the limelight first no matter how you do it: there is no financial institution that is too big to fail. There are only collapses caused by the failure of large financial institutions. Luna, the top ten market capitalization, dropped to zero in seven days, and FTX, the second largest exchange, Big investment banks such as Three Day Bankruptcy and Lehman Brothers are good examples. There is no need to expose a large amount of your principal for that little interest. Even if there is less than a 1% chance of collapse, you can keep the principal without fear of running out of money. invest
Diversify funds: After this incident, don’t put all funds on the same exchange, even in traditional finance. Put them in different banks or treasury bonds to diversify risks.
Discount what the project team said: All companies that are about to go bankrupt will come out and say that we are completely fine. Please believe us. This is the case for Terra, Celsius, Sanjian, and Alameda. The same is true for FTX, but it will not be the last one. No matter How to be bold in doubting, cautious in seeking confirmation, and avoid risks first
Discount what believers say: When believers say how big a future a certain currency will have, they must be skeptical and seek verification.
Read more comments from community leaders: When an epic crisis occurs in the currency circle, be sure to read more comments from the group, especially the leaders.
Overall warning
Once someone or an institution provides stable returns that are higher than those of banks and bonds, even if they are authoritative and trusted by almost everyone, they still need to carefully consider why and where the profits come from.
In a bull market, the most profitable strategy is always to use leverage, but in a bear market, when liquidity is insufficient, it is often those who have tasted the sweetness who are furious.
We are all retail investors and it is impossible to understand the operating conditions of the company. When the next financial crisis occurs, do not trust any company. They will only say that their company is very good and has no problems. When there is a real thunderstorm, they will only I told you I'm sorry, I told you I would try my best to make amends and calm people's hearts. In the end, you are the one who gets hurt.
Confidence is a very important asset in any industry or situation. Once there is a hole in confidence, it will take dozens of good images to make up for it.
Large financial institutions usually don't have accidents/news. Once there is an incident/news, it will be a big deal.
Don’t borrow money to invest, always put risk first