Co-founder of Bitcoin Policy Institute says the crash of FTX is a setback for digital currency
While FTX crashing may be a setback for the cryptocurrency, David Zell says that it may benefit Bitcoin as a whole.
With the crash of the second largest cryptocurrency exchange, FTX, occurring over the weekend, co-founder of Bitcoin Policy David Zell says that this is bad for cryptocurrency as a whole, but beneficial for Bitcoin.
"I think in the short term, this is bad for the entire industry," Zell said on the "Just the News, No Noise" TV show. "But in the long term, I think it's really good for Bitcoin. The whole mantra of Bitcoin has always been the chief value proposition that you have a source of value that you can custody yourself. You don't need to trust anyone else. You don't need a counter-party risk. So the idea of taking those Bitcoin or crypto tokens you have and placing them with a third party exchange, kind of defeats the whole purpose."
According to Zell, the reason that FTX crashed is that their token didn't have any buyers.
"What FTX did was create their own cryptocurrency and called it FTT," Zell explained. "It used a trading firm closely connected to their exchange to artificially inflate the value of that token, and then use it as collateral to borrow more money. The problem was that the underlying token didn't really have any buyers. It was a perpetual motion machine, and it led to their bankruptcy."
Zell says that many people still have confidence in Bitcoin despite the crashing of FTX.
"Bitcoin was invented so that you can take control of your own money," Zell stated. "So the most important advice that anyone can take and hear right now is that if you have cryptocurrency, whether it's Bitcoin or anything on a centralized exchange, you need to withdraw it and custody it yourself."
"The biggest advice that people say in the Bitcoin world is 'Not your keys, not your coins.' In this instance, the people that lost money on FTX failed to follow that golden rule," Zell concluded.