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A lesson from FTX

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It seems like the most popular takeaway after FTX has been revealed to be insolvent is that self custody is the safest way to go. However, I believe most people are overlooking the biggest concern that could be drawn from it. There were 3 giant centralized exchanges in cryptocurrency: Binance, Coinbase, and FTX. One of them is now on the edge of bankruptcy. There is a huge danger in narrowing that list to two. If a large percentage of people decide to sell after what’s happened, how can we know that Coinbase and Binance have enough liquidity to facilitate withdrawals? The gains that crypto has seen dwarf the revenue collected by exchanges.

One of the first things that happened during the Great Depression were mass attempts to withdraw cash from banks who did not have that cash on hand. Stable coins are not a solution. If you can’t sell them, you can’t spend them. Tether limited is not a central bank. No matter how much USDT is minted, they cannot create more USD out of thin air.

I’m not trying to fear monger, but people should be more concerned and should be demanding more transparency for centralized exchanges. Hardware wallets cannot be frozen. But if centralized platforms don’t have enough cash to pay out to those who want to sell, then it completely undercuts any value proposition for cryptocurrency regardless of whatever the price is or how much your wallet is saying it’s worth.

submitted by /u/Kind-Evening2778
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