Sam Bankman-Fried and FTX: Valuable Lessons from Their Fall

The fall of the crypto king, Sam Bankman-Fried, has been the talk of the town for a couple of months. It has brought many crypto investors from their state of euphoria back down to earth. Sam Bankman-Fried, the CEO of one of the largest cryptocurrency exchanges, FTX, saw everything crumble after being found guilty of multi-billion dollar fraud and money laundering.

The now-collapsed crypto exchange company FTX was a significant player in the crypto industry, having a market valuation of over 32 billion dollars. As of today, it is no more, which shows how things could quickly go awry in the crypto industry. Since the trial had significant importance on the crypto market, it was heavily monitored by many traders and investors.

The rise and fall of individuals and businesses in the financial world have always been of great interest, and Sam's story is no different. For new individuals traversing into the crypto sector, the situation between Sam and FTX should be a vital learning point. This article will explore some of the valuable lessons to take note of from the fall of FTX and its founder, Sam Bankman-Fried.

Who is Sam Bankman-Fried?

FTX is a name that should be familiar to most entrepreneurs who have been active in the cryptocurrency industry since its beginning. It was the second-largest crypto exchange before things started taking a turn for the worse. Its founder, Sam Bankman-Fried, also known as SBF, is a young MIT graduate and son of two Stanford law professors. Before clocking the age of 30, Sam was already a well-known billionaire, having an estimated net worth of $26 billion in 2022.

Sam Bankman-Fried's journey in the crypto space began with the creation of Almeda Research, a quantitative cryptocurrency trading firm. His innovative approaches to trading and risk management soon caught the attention of the crypto community, and he swiftly rose to prominence. He was known for being the nerdy crypto guru with his shorts, tee shirts, and flip-flops, which he occasionally wore. SBF emitted an aura of trust, which was probably part of the reason many refused to believe he was capable of such crimes.

Valuable Lessons to Learn from the Fall of FTX and its Co-founder

To prosper in the cryptocurrency industry, traders and investors alike must be willing to learn from the mistakes of others. A situation that marks the perfect opportunity to grasp a little bit of knowledge and valuable insights is the collapse of FTX. Highlighted below are some essential lessons crypto enthusiasts should take away from this whole debacle.

The Possibility of Collapse Will Always Linger with Cryptocurrencies.

Cryptocurrencies are volatile; market fluctuations happen a lot more frequently. Any investor willing to go into cryptocurrencies should be aware of the risks. They should be prepared for a price drop when unfavorable situations hit the crypto market. Hence, traders and investors need to stay updated on the happenings in the crypto market. There are several online places where they can read best crypto and Bitcoin news to enable them to monitor their investments effectively.

Avoid Follow the Leader Mentality

Unknown to many, large investors are more susceptible to making bad investments than we might believe. Most investors tend to monitor the operations of the heavyweights in the industry and mimic their activities. Cryptocurrency investors are in the business of taking risks, and a vast majority of these investments fail all the time. For this reason, many tend to risk only small amounts of their portfolio.

Big-name companies in the industry are all in a battle among themselves; they want to take advantage of the next big thing, which their counterparts are already benefiting from. So, in order not to end up the major loser, try and express a little bit of individuality in your investments.

Avoid Leaving Your Cryptocurrencies in an Exchange

There is a common belief or saying among investors in the crypto industry that crypto exchanges are the weakest link in the industry. Crypto exchanges are the targets of hackers, which is why you should not leave cryptocurrency in an exchange. Only leave it on exchanges if you have the intention of selling it; otherwise, store it in a cold wallet. Leaving it an exchange puts you at risk in case of a hack or bankruptcy.

Avoid Celebrity Endorsements

Sam Bankman-Fried was known for courting a lot of celebrity endorsements, which ultimately painted him in a good light in the industry. In situations like this, it is best to do what your heart tells you or what you desire. Shut off the outside world and focus on yourself. Many celebrities who work hand in hand with Sam Bankman-Fried are also being sued because of their participation. Hopefully, this would slow the rate of celebrity endorsements in the crypto industry.

Diversify your Business for Risk Mitigation

Diversifying your business offerings can help mitigate risk. It is very tempting to put all your efforts, time, funds, and energy into what is working, which is why you need to take time and consider if it fails. Relying too heavily on a single product or service can leave a business vulnerable to market fluctuations or changes in demand.

Avoid putting all your eggs in one basket; spread your wings and venture into several businesses. For any entrepreneur, diversification is the best way to progress in the industry. Fortunately, the crypto space is ample, allowing you to diversify your income streams.

You Can't Move Fast Enough.

When things turn for the worse, you find out that timing matters a lot in the crypto space. Withdrawing your money becomes very difficult and sometimes impossible, as we can see in the case of FTX. It is a very strenuous task to check on your investments every day, much less every minute and every hour in a day. For this reason, it is best to only invest in something you are comfortable holding for long.