It’s been a little over one month since FTX, a Bahamas based cryptocurrency exchange, filed for bankruptcy. The Bitcoin and crypto community are still reeling from the aftermath and licking their financial wounds. The collapse left roughly 1 million creditors facing losses of billions of dollars and retail depositors losing over 8 billion.

The pain didn’t stop with FTX but had a ripple effect that was felt by Genesis, BlockFi, Crypto.com and Gemini customers as well when withdrawals were paused and interest bearing account balances suddenly went to zero. Many are still scratching their heads and asking themselves how this could have happened. Even still, many are screeching for regulation in the crypto industry. Trust in the industry is shaken and many are left questioning if regulation is the only answer. How could all of this have been avoided? How could the millions who lost their money have protected themselves? What led to this monumental disaster? Was it greed, ignorance, corruption, or something else?

It’s a complicated tale, but ultimately FTX failure was a result of a lack of liquidity and gross mismanagement of customer funds. FTX was just one business in a whole conglomerate owned by Sam Bankman-Fried, founder and former CEO of FTX. One such business was Alameda Research, a small trading firm. The tangled and questionable relationship between FTX and its sister company Alameda Research has come under increasing scrutiny over the last few weeks, as it seems customer funds from FTX were being funneled and used to run Alameda’s trading business. The world is sitting on their heels and staying tuned as the convoluted details of the role of this relationship in FTX’s downfall continues to unfold.

Tragically, FTX isn’t the first exchange downfall of its kind. History has repeated itself over and over again, starting with the downfall of Mt. Gox in 2014. Mt. Gox was a Bitcoin based exchange operating out of Tokyo, Japan that was handling over 70 percent of all Bitcoin transactions worldwide before it abruptly ceased operations, filed for bankruptcy, and closed its website. Mt. Gox had been involved in the loss or theft of hundreds of thousands of its customers’ Bitcoins, and the customers had no recourse. Over 8 years later, only some of these funds are now being “found” or recovered. This was just the first of many, including Voyager, Blockchain Global, and Celsius to name a few. I suspect these will not be the last. No exchange is “too big to fail” and the lack of repercussions when they do leaves little incentive to prevent future catastrophes.

Speaking of not “too big to fail”, Binance, the world’s largest crypto exchange and also a key player in the FTX saga, has recently come under the microscope in the wake of the scandal. In fact, many blame a November 6th tweet by Binance CEO CZ, stating his intention to liquidate his FTT(the native token of FTX) holdings due to “recent revelations” for the sudden bank run on FTX that ultimately led to them halting withdrawals. In 2019 Binance had invested deeply in FTX. When Binance publicly announced its intention to exit that position last year in the now infamous tweet, SBF agreed to buy them out of their stake for 2.1 billion dollars. A huge portion of that 2.1 billion was paid in FTT which is now severely devalued. However, the plunging value of FTT might just be the least of Binance’s many woes. Due to FTX’s current bankruptcy proceedings, the entire 2.1 billion may be considered fraudulent conveyances by the courts, and Binance could be forced to pay it back. Consequently, customer confidence and trust in the exchange giant is shaken and there has been a recent surge in customer withdrawals at Binance as well as a dramatic drop in their own BNB coin. Changpeng Zhao, known publicly as CZ, the founder and CEO of Binance has made many statements and interviews in the wake of the FTX fallout vehemently denying any financial instability in the company and assuring the public of complete transparency. However analysis of corporate filings by Binance do not seem to reflect the transparency claims. Only time will tell if they can weather the storm or if Binance will be the next to fall? The shock waves to the market from FTX would pale in comparison to the fallout of a giant like Binance.

The most important lesson to take away from this whole debacle should have been the one of self-custody. Self-custody versus holding your Bitcoin in a custodial wallet is a concept that so many newcomers to the space have zero grasp of. Unfortunately, many people only learn this lesson the hard way when something like the FTX scandal happens.

So, what is self-custody? What does it mean and how can you practice it to protect yourself? What is the difference between a custodial vs a noncustodial wallet? If your private keys or seed phrase is held by an exchange or third party, then it is in fact, NOT YOUR BITCOIN. The only way you can avoid becoming the next victim of an exchange downfall and be in full control of your assets is to store your Bitcoin or crypto in a self-custody wallet such as a cold storage device (Trezor, Ledger, etc..) or at the very least one of the online hot wallet applications that allow you to hold your own keys such as BlueWallet or Phoenix wallet. Non-Custodial wallets can be intimidating to the Bitcoin newcomer. The internet is full of horror stories of millions lost by those who have misplaced their private keys. However as adoption spreads, Bitcoin educators are setting up shop all over the world and offering support to those who may need a helping hand to feel more secure in holding their own private keys. From the Bitcoin Ekasi in South Africa, Mi Primer Bitcoin in El Salvador, to our very own AmityAge Academy in Roatan, Honduras, Bitcoin education is becoming more mainstream and offering a haven for those seeking education and support in the industry.

Despite the obvious and practical solution of self custody, many still ask, “Why not regulation?” For the true Bitcoiner, regulation goes against the very core principles and philosophy that Satoshi Nakamoto the creator of Bitcoin wished to bestow upon the world. Bitcoin was born to be the antithesis of fiat, the government issued and controlled currency. Every fiat currency that has ever existed has failed miserably, with the average life expectancy being roughly 27 years before they crash and burn. History has well established that when the government is in control of the currency it is corrupted, inflated and ultimately doomed. Bitcoin is the antidote. Bitcoin is designed to be incorruptible. The core values that are built into Bitcoin are those of Freedom! Decentralized, Trustless and Permissionless are the defining features that make Bitcoin the financial revolution that is changing the world as we know it. Allowing…worse yet, begging the government to step in and take the reins will compromise the values that are at the very core of everything that Bitcoin stands for. This seems beyond counterintuitive, but a slap in the face of Bitcoin. The silver lining to this whole disaster is that it serves as a teaching moment for everyone who was paying attention. The fall of FTX was a call to action for everyone who holds Bitcoin or cryptocurrency to learn how to utilize a self custody wallet and never hand over the keys to your wealth to ANYONE else ever.