It's been a tough year for the crypto markets - first the Luna debacle in the spring and now Sam Bankman-Fried's FTX.
Both of these companies were seen as the "safe" spaces to invest in crypto. However, what they both have in common is their function as a platform to link the traditional finance (TradFi) world with the new blockchain/crypto (DeFi) world. As I've said before, this model is the perfect storm to lose money - in the billions we've found.
There is a reason we have regulations in TradFi. Traditional financial processes are based on trust between people. This makes them susceptible to corruption. Regulations limit the corruption - or at least makes someone (usually the government) responsible for making people whole when the corruption gets out of hand.
Alternatively, Blockchain has no regulation because the technology controls the process and provides the transparency to limit the corruption.
The problem arises when the two are connected. When TradFi is tied to DeFi, it lets the corruption of tradfi operate in a space with no regulation - without the benefit of the software to provide transparency in the blockchain.
It becomes a "mash-up" just like the picture.
We've seen the results this year, not once but twice.
Who's next?
If you are investing in crypto and you don't understand what is happening in this space, it is time to become educated. Find out the stories and the science behind the products.
This doesn't have to be a scary space. But it takes responsibility for making informed investor decisions.
TIP: If you are holding any crypto assets on a Centralized Exchange get it moved into your HARDWARE wallet.
If you have crypto assets and you don't understand this tip, then send me a DM.
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