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Cryptocurrency exchanges are the lifeblood of the crypto world, providing a way for people to buy and sell tokens and coins. But they can also be a source of heartache and loss, as many people have found to their cost.
In this article, we look at how to avoid losing crypto on an exchange. Not all exchanges are created equal, and some are far more reliable than others so ensure you research before using any platform.
One of the reasons for FTX's bankruptcy was poor liquidity due to improper management on the part of the executive. Following a recent report suggesting potential leverage and solvency concerns, investors and traders began to panic, attempting to withdraw all their funds from the exchange at the same time. This mass exodus of funds drained the reserves of the exchange and the lack of liquidity crippled their operations, leading them to eventually go bankrupt. This is why it's important to use exchanges with high levels of legitimate liquidity so you can ensure that your funds won't be subject to sudden mishaps like we saw with FTX.
Besides FTX, FTX US as well as other smaller corporations affiliated with FTX have filed for bankruptcy, citing the same reasons of poor liquidity. This serves as a reminder to be extra cautious when choosing the exchanges you entrust with your funds - the old adage 'if it's too good to be true, it probably is' rings especially true here.
So far, we’ve covered the importance of researching the exchange you want to use and the potential pitfalls associated with poor liquidity. Now, here’s a handy list of the top six security tips to keeping your crypto safe:
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