FTX Collapse: 5 lakhs Indians unlikely to get back funds, Industry Experts opine THESE precautions for investors

FTX Collapse: Another US crypto finance firm BlockFi has filed for bankruptcy to help stabilize its business, as investors are yet to recover from the fall of crypto exchange FTX.

Experts said that crypto investors need to calculate their risk appetite before starting their crypto journey.

FTX Collapse: The world's largest cryptocurrency exchange FTX filed for bankruptcy earlier this month. This sent shock waves among the crypto investors as the collapse had a global impact. Now, another US crypto finance firm BlockFi has filed for bankruptcy to help stabilize its business, as investors are yet to recover from the fall of crypto exchange FTX. In a similar development, US-based crypto exchange Bitfront has said it has suspended new sign-ups and credit card payments and will shut down services. Industry experts has cautioned investors in wake of the collapse. They said that the FTX collapse affected around 3-5 lakh Indians.  

"The FTX crash has hit many people. We estimate that 3-5 lakh Indians would have had exposure to the exchange and its token FTT. The investors who lost money in the FTX saga are in agony. It is unlikely that they will get all their investments back even if FTX receives extra funding via a takeover etc," said Vikram Subburaj, CEO of Giottus.

Tarusha Mittal, COO and Cofounder of UniFarm, said that post the FTX collapse, investors are closely monitoring the developments in the crypto ecosystem and learning the nuances of crypto investing through detailed research.

Experts said that while there are no regulations in place in India as of now, a strong framework is the need of the hour. They said that there is an increased demand on crypto exchanges to publish proof of reserves (PoRs) that will help bridge the trust gap.

"We need to create a global consensus around the regulatory framework for digital assets. We cannot have isolated policies for digital assets due to their global nature and need to work towards creating a transparent ecosystem where investors are made aware of the risks involved," said Shivam Thakral, CEO of BuyUcoin.

Mahin Gupta, Founder of Liminal, said that crypto trading places will require regulated qualified custodians to provide segregation of duties and risks. "From a retail user (or investor) perspective, maintaining your own asset safety is of utmost importance. As the saying goes, ‘Not your Keys, Not your Coins’, so it is always advisable to opt for hardware wallets to secure your assets at the same time; if you are not trading, then don’t keep your money on an exchange," he said.

Impact of FTX collapse on crypto investment

Experts opined that FTX collapse is widely perceived as a cleansing of a crypto ecosystem where companies with weaker fundamentals are being eliminated from the market. They said that the crypto market will emerge stronger from the FTX crisis.

Current crypto investment trends in India

Experts said that the FTX collapse and other major global events had a huge adverse impact on Indian crypto investors using foreign exchanges. "We expect this trend to continue with Indian crypto investors coming back with their assets to domestic and decentralised exchanges," said Gupta.

Precautions for crypto investors

Experts said that crypto investors need to calculate their risk appetite before starting their crypto journey. They said that investors can also take appropriate crypto insurance to secure digital assets.

"In such an unregulated space, the onus is definitely on the investors to see that their funds are in trustworthy wallets. In terms of investment, now is the time to focus on coins with strong fundamentals like Bitcoin and Ethereum. Investors should desist from putting all their capital in crypto as it is a high-risk and volatile asset," said Subburaj.