Well, it’s happening again, as the bear market continues to unfold centralized exchanges continue to take a massive knock. Apart from FTX and Binance, pretty much every other exchange is laying off staff and cutting back wherever possible. Approximately a month ago I published an article entitled, “Binance & FTX Display Why They Are The Top Dogs”. The points I addressed in this particular article are now busy being confirmed in current events. As lenders and exchanges endeavor to push on in the face of adversity, many are getting crushed. This is largely due to poor risk management and unbridled zeal. Unfortunately, this has a ripple effect on the entire sector.
Painted With The Same Brush
Once again, human behavior is extremely predictable. As certain bad actors or unfortunate parties begin to fall, so do their neighbors. Unfortunately, many good exchanges will be unfairly painted with the same brush. As a result, many exchanges will be unfairly punished and subsequently become attractive to the traditional “value investor”. In other words, CEX tokens will be heavily oversold and will be extremely “cheap” in relation to their inherent value.
A Perfect Example
Let’s look at a smaller exchange that is still fairly relevant in terms of trading volume. AscendEX, formerly Bitmax, continues to operate without any issues and generally doesn’t enter the limelight very often, is already trading at an enormous discount. You have to remember that this CEX token peaked at $3.26 in 2021 and is now trading at $0.059 at the time of writing. That’s a whopping drop of 98.2% from the all-time high. Consider that the price is likely to drop further and you can begin to see a lot of value.
I have been holding ASD since 2018 or 2019 and accumulated my tokens between $0.03 and $0.05. That means that some of my tokens realized more than 100X in the recent bull run. This is evidence that this token is interpreted as valuable to some extent and holds future promise. ASD is traded on AscendEX and FTX primarily. Staking ASD also earns dividends in USDT, BTC, and ETH. The current APR is 18% at the time of writing.
I guess many will be extremely wary of exchanges and “staking” at the moment. However, fortune favors the brave and certain exchanges are going to experience a solid rebound and rally eventually. BNB and FTT continue to be fairly sound exchange tokens to own going into the next bull run but you also need a bit of high risk/reward exposure.
Don’t Make This Common Mistake
Keep your risk allocation low in terms of portfolio exposure. Don’t exceed more than 10% when it comes to high-risk or extremely speculative plays. A similar approach should be utilized in terms of lending and DeFi. If you hold the majority of your portfolio in your own non-custodial wallet and that majority is made up of blue chips and stablecoins then you can enjoy some risk exposure without being concerned about being completely wiped out.
A lot still needs to play out before considering this idea. We need to see how these exchanges handle “extreme pain”. You also need to consider that this is a risky idea and you would have to do a significant amount of research prior to any investment decisions. Something that always amazes me is how some readers actually consider a blog article research. No, it’s an idea. Research is the readers’ responsibility. These are merely my own thoughts and views and should not be considered investment advice in any way.