As the story of the collapse of FTX unfolds, investors are beginning to worry about the fallout and long-term implications on the entire crypto industry. The fall of FTX has reignited discussions about the opaque nature of crypto exchanges, their lack of transparency, and the loss of trust in the industry.
In the last three days, some crypto exchanges are scrambling to introduce “proof-of-reserves” to reassure jittery customers. Yesterday, the world’s largest crypto exchange Binance publicly published its fund reserves as fear of insolvency grapple crypto investors following FTX contagion.
However, some crypto investors still confuse crypto exchanges with actual cryptocurrencies like bitcoin and Ethereum. But your cryptos are only as safe as where you store them. That’s why Elon Musk is urging crypto investors to take their crypto out of the exchanges and keep them in cold wallets.
Earlier Saturday morning, at around 2:30 AM EST, Musk joined a Twitter Space with over 60,000 listeners to discuss the hack of FTX and his views about when he first met the company’s founder Sam Bankman-Fried.
“To be honest, I’d never heard of him,” Musk said. “But then I got a ton of people telling me [that] he’s got, you know, huge amounts of money that he wants to invest in the Twitter deal. And I talked to him for about half an hour. And I know my bullshit meter was redlining. It was like, this dude is bullshit – that was my impression.”
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Musk continued: “Then I was like, man, everyone including major investment banks – everyone was talking about him like he’s walking on water and has a zillion dollars. And that [was] not my impression…that dude is just – there’s something wrong, and he does not have capital, and he will not come through. That was my prediction,” Musk added.
Toward the end of the Q&A session, Musk was asked: “if people should get out of exchanges and be in charge of their cryptos due to many cases of people losing their cryptos because of dishonest people.” Musk responded by telling the listeners that they should keep their crypto in cold wallets, not in exchanges.
“I would reaffirm that, if you have crypto, you should have it in a directly-accessible cold wallet. Not in an exchange,” Musk said. “That would be wise.” He also added, “As the saying goes, not your keys, not your wallets.”
This is not the first time Musk had warned people about the risk of storing their cryptos in crypto exchanges. In February 2021, Musk advised people on how to securely store their cryptos. In a post on Twitter, Musk said, “Any crypto wallet that won’t give you your private keys should be avoided at all costs.”
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During the Twitter Space session, Musk also reaffirmed his support for crypto as a whole, including Bitcoin. “I think there probably is a future for Bitcoin, Ethereum, and DOGE. I can’t really speak to the others. But if you’ve got one of those three in a cold wallet, and off an exchange, I think my guess is it works out well,” Musk added.
Meanwhile, there were reports that FTX founder Bankman-Fried secretly moved $10 billion to Alameda Research using a “backdoor” he built into FTX software without alerting external auditors.
