We can say that the year 2022 is a year full of twists and turns in the cryptosphere. If some made money, many got REKT. They lost because of bad investments, scams, CEX failures (centralized exchanges), or even all of the above. The FTX disaster that follows many others may be an opportunity to remember the basics to no longer get “REKT.”
We can already start with a small reminder about the origin of the word REKT.
Origin and meaning of REKT
REKT (or rekt) is derived from the English word “wrecked”. It is a slang term to define something or someone that has been ruined, looted or destroyed. The origin could be the use of this word by a user, Balrogboogie, on a World of Warcraft forum in 2012.
Originally used in gaming, REKT is perfectly suited for the brutal trading world: every trader will experience REKT at least once in their career. So to become REKT is to lose everything quite brutally, even very brutally. Bad trading (with catastrophic leverage), exit scams, sudden bankruptcy of an exchange, many individuals have lost colossal amounts of money in the crypto market this year. The summer was marked by disasters and the nightmare culminated in the bankruptcy of FTX, until recently the second crypto exchange after Binance.
You can get REKT without trading!
The promise of easy profits in bull market phases attracts many retail investors. They start more or less well on the internet, go into the adventure with hope (and sometimes a little too greedy) and are easy prey for scammers. Perhaps out of convenience, these new investors leave their money on exchanges or entrust them to more or less honest people.
And herein lies the real problem: bitcoin (BTC) was born during the subprime crisis, which culminated in the bank’s bankruptcy. Lehman Brothers and the discovery of Bernard Madoff’s giant Ponzi scheme. Bitcoin was born to no longer need a bank intermediary or other so-called “trusted” third party. Bitcoin was born so that citizens could transact among themselves, peer-to-peer transactions.
“Not your keys, not your bitcoins”
Sometimes we learn from pain. Once bitcoins and cryptos are on a centralized exchange, they do not belong to their owner who does not have the private keys of their cryptocurrencies. This is so that if the exchange is shut down or hacked, there is nothing users can do to get their money back. In any case, it takes time and the result remains uncertain. It is therefore essential to have a hardware wallet such as Bitbox, Ledger or Trezor (there are many more). If you are not a knowledgeable trader, it is more reasonable to invest regularly (DCA) and have your private keys. In any case, do not put all your money in one exchange.
If troubled banks usually get state support (with citizen taxes) (too big too fail, meaning that if a big bank went bankrupt, the whole system would destabilize and therefore have to be bailed out of the treasury), then it’s not the same with cryptocurrency- exchanges. So there is almost no guarantee that you will get your money back in case of bankruptcy. And no exchange is immune, as FTX’s terrible story clearly shows. This will give further food for thought to critics of bitcoin and cryptocurrencies and new reasons for lawmakers to tighten controls. Yet the problem is not bitcoin (BTC), the problem comes from trusted third parties: mismanagement, hacking, corruption and greed. It’s time to manage your money yourself, that’s why bitcoin was born.
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Subprimes, financial crises, galloping inflation, tax havens… Bitcoin was designed for greater transparency and perhaps to finally change the situation. I try to understand this new environment and try to explain it myself. The road is undoubtedly long, but it is worth it.