FTX: The Giant’s Collapse and Our Chance to Return to Crypto’s Roots 2025

Honestly? It’s been over two years since the crypto world was rocked by the news: FTX—one of the largest exchanges—was billions of dollars in debt. I remember November 2022: the panic, crashing prices, frantic questions flooding chat groups. We were all stunned. Everything seemed to be collapsing. But today, in June 2025, I see this collapse not just as a tragedy, but also… a massive opportunity. A chance to remember why Satoshi Nakamoto created Bitcoin in the first place. A shot at true decentralization. Let’s break down what happened, why it matters now, and how we move forward.

What Happened to FTX? The Key Points

FTX didn’t just go bankrupt. Investigations revealed a horrifying picture:

1. Client funds ≠ Operating funds? Ha! Turns out FTX freely used user funds (yours and mine!) for risky bets via its hedge fund, Alameda Research. In traditional finance, this is strictly forbidden and called “misappropriation of client funds”—like your bank gambling with your deposits.
2. “Creative” Accounting: FTX’s native token FTT was used as collateral on its own exchange at inflated prices. A classic pyramid scheme.
3. Regulators? Asleep at the Wheel? Yes. Despite Sam Bankman-Fried’s (SBF) loud promises about regulatory cooperation, no one truly monitored FTX’s internal operations. Result: billions in losses for investors and users.

The Fallout: Noise, Fury, and… More Centralization?

Washington and Wall Street reacted fiercely:

• Trials and Investigations: DOJ (U.S. Department of Justice), SEC (Securities and Exchange Commission), CFTC (Commodity Futures Trading Commission)—all jumped in. SBF was convicted, but industry repercussions continue (as of June 2025, proceedings against other figures and attempts to recover client funds are ongoing).
• Calls for Regulation: Politicians declared: “See! Crypto urgently needs regulation!” Their argument? That the lack of clear rules allowed FTX to become an unregulated offshore monster.

But hold up! Let me ask: Is regulation really the cure?

After all, SBF himself was crypto’s top lobbyist for regulation! He lavished donations on politicians and pushed for rulebooks. The irony? His exchange imploded by violating fundamental principles of integrity that already exist in traditional finance! The problem isn’t missing rules—it’s that they weren’t enforced or failed.

Remembering Satoshi: Why Centralization is Anti-Crypto

Recall the message in Bitcoin’s genesis block?

“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”

Satoshi’s meaning was clear: the traditional financial system—with its centralized banks and regulators—is broken. The 2008 crisis (Lehman Brothers collapse) proved it. Regulation didn’t save us from greed and recklessness. It just bailed out the guilty using taxpayer money.

Bitcoin and blockchain’s purpose is to give people financial sovereignty:

• “Not your keys, not your coins”: This isn’t just a meme—it’s foundational. Had all FTX users stored crypto in personal wallets under their control, the exchange’s collapse would’ve only affected their trading positions, not all their savings.
• Trust vs. Code: Replace trust in intermediaries (banks, exchanges) with trust in cryptography and open-source code. “Code is Law.” Rules are programmed and executed automatically, free from human bias.
• Decentralization: Power is distributed across a network, not concentrated in a few “chosen” hands in expensive offices.

Where We Went Wrong: The Lure of Convenience and Greed

I’ll admit—I used CEXs (Centralized Exchanges) for years too. They’re convenient:

• Easy fiat-to-crypto purchases (dollars, euros).
• Simple interfaces.
• High-speed trading.

Centralized services (exchanges, staking providers, lending platforms like Celsius) did help millions enter crypto. But the price for convenience was monstrous: we voluntarily surrendered control of our assets, reverting to the old model of trusting intermediaries—the very system Bitcoin was meant to replace! Greed (from profit-hungry platforms and users chasing easy gains) pulled us away from decentralization’s ideals.

FTX: The Brutal Wake-Up Call for Self-Custody

FTX’s collapse was a catalyst. People massively withdrew crypto from exchanges! Crucially: they withdrew to personal wallets—not back to fiat (bank accounts). Glassnode data (late 2022/early 2023) was staggering:

• Bitcoin: Self-custody outflows hit 106,000 BTC monthly! A historic record.
• Ethereum (ETH): ~$2.5 billion ETH left exchanges.
• Stablecoins: Nearly $2 billion in USDT, USDC, etc.

What this means: People didn’t lose faith in crypto—they lost faith in centralized custodians. They embraced “Be your own bank.” This was a fundamental shift.

2025 Trends: Self-Custody Reigns, DEX Gains Ground

The panic has faded. What do we see now in June 2025?

1. Self-Custody is the New Norm: For experienced users and long-term holders, storing assets in personal wallets (especially hardware wallets like Ledger or Trezor) is standard. This isn’t niche—it’s a security baseline.
2. DEX (Decentralized Exchange) Growth: Trading volumes on DEXs like Uniswap (now V4), PancakeSwap, and Curve remain far above pre-crisis levels. Why?
   • Control: You trust no one with your funds. Trade directly from your wallet.
   • Transparency: All transactions are on-chain.
   • Resilience: No single point of failure (like an exchange server).
3. CEXs Haven’t Vanished, But…: Major CEXs (Binance, Coinbase, Kraken) survived under intense regulatory scrutiny (especially Binance post-2023 issues). Their role has shifted:
   • On-Ramp/Off-Ramp: The primary way to buy/sell crypto for fiat (though P2P platforms are rising).
   • Beginner Trading: Simpler interfaces.
   • Institutional Services. But key trend: users don’t leave large sums on CEXs long-term. Buy → Withdraw to wallet/DEX.

CEX vs DEX Comparison: Where to Do What in 2025

Key Terms: KYC = Know Your Customer; Gas = Network transaction fee; Slippage = Difference between expected & actual trade price.

Experts Speak (and We Should Listen)

The collapse of centralized players drew reactions from true crypto advocates:

• Anthony Sassano (Ethereum Educator): “FTX’s collapse showed people the dangers of centralized custody. Hopefully, it also encourages withdrawing ETH staking from centralized providers to decentralized solutions (or solo staking).” (2025 context: Solo staking & decentralized pools like Rocket Pool/Lido dominate).
• Changpeng Zhao (CZ), former Binance CEO: “Self-custody is a fundamental human right. Start small to master the tech—mistakes are costly. Stay #SAFU.” (2025 note: CZ departed; Binance under new leadership and stricter oversight).
• Michael Saylor (MicroStrategy): “Custodial systems concentrate power, inviting abuse. Self-custody creates checks/balances, forcing transparency.” (MicroStrategy continues aggressive BTC accumulation).
• Sasha Ivanov (Waves Founder): “This wasn’t crypto’s failure—it was centralized crypto’s failure. Trading firms, VCs, and CEXs must die. It’s inevitable.” (Thesis on centralization remains key).

Regulation vs. Decentralization: Be Careful What You Wish For

Yes, regulation might add safeguards. But the cost could be high:

• Stifles Innovation: Overly strict rules crush small projects.
• Identity Control: Heavy KYC/AML kills pseudonymity—a core crypto feature.
• “Regulatory Arbitrage”: Big players exploit loopholes or relocate (as FTX did). Small projects can’t.
• Illusion of Safety: Regulation doesn’t guarantee honesty (see FTX/traditional finance scandals). It creates a feeling of security.

Real protection lies in technology:

1. Self-Custody: Control keys = control money.
2. DeFi (Decentralized Finance): Use protocols with rules encoded in software (lending, staking, trading).
3. DEX: Trade without trusting intermediaries.
4. Blockchain Transparency: All transactions are public and verifiable.

Practical Checklist: Embracing Decentralization NOW (June 2025)

1. Master Self-Custody:
   • Buy a Hardware Wallet: Ledger (Stax), Trezor (Model T)—top security. Start small!
   • Use Trusted Mobile/Desktop Wallets: Trust Wallet, MetaMask (ETH/EVMs), Phantom (Solana)—for daily use, not large sums.
   • BACKUP YOUR SEED PHRASE! Write it on paper, store in a safe. Never digitize it except for recovery!
   • Action: Withdraw at least some assets from exchanges to your wallet. Today.
2. Experiment with DEX:
   • Start with Uniswap (Ethereum, Arbitrum, Optimism, Polygon) or PancakeSwap (BNB Chain): Connect your MetaMask/Trust Wallet.
   • Understand Gas (Network Fees): High on Ethereum Mainnet, lower on L2s (Arbitrum, Optimism) or chains like Polygon, Solana.
   • Try a Small Swap: USDC to DAI, or a little ETH for a memecoin. Feel the control.
   • Learn Key Concepts: Slippage (price variance), Liquidity Pools.
3. Explore Decentralized Staking/Lending:
   • Ethereum Staking: Use Rocket Pool (rETH) or Lido (stETH) for decentralized staking. Avoid CEX staking!
   • DeFi Lending/Borrowing: Aave, Compound. Earn yield or borrow crypto without intermediaries.
4. Stay Informed & Skeptical:
   • Read Primary Sources: Project documentation (Whitepaper, Docs), not just media.
   • Verify Contract Addresses: Double-check tokens/protocols on Etherscan/BscScan before interacting!
   • Avoid Unrealistic Yields: If it sounds too good to be true—it’s likely a scam or high-risk rug pull.

FTX and Decentralization: 10 Burning Questions Answered (June 2025)

Post-FTX, everyone asked the same things. Now, with perspective, understanding matters more. Here’s what I hear most—answered for 2025 realities:

1. Q: “Wouldn’t regulation have prevented FTX? Aren’t more rules the answer?”
   A: SBF himself lobbied hardest for regulation! The problem wasn’t missing rules—it was enforcing existing ones (like “don’t gamble with client money”). New rules add bureaucracy, not guarantees. Better protection? Self-custody and blockchain transparency.
2. Q: “Can lost FTX funds EVER be recovered?”
   A: Harsh 2025 truth: Bankruptcy drags on; any recovery will be partial and minimal. Core lesson: If assets aren’t in your wallet, you risk everything.
3. Q: “Self-custody sounds scary! What if I lose keys/wallet?”
   A: Tech evolves! Beyond seed phrases (store in safes/metal plates!), try MPC wallets (multi-party computation) or social recovery (e.g., via trusted contacts). Start small—security is in your hands.
4. Q: “Are CEXs obsolete? Will Binance/Coinbase vanish?”
   A: No (major ones survive under scrutiny). But their role shifted: primarily fiat on/off ramps and beginner platforms. Storing long-term/large sums on CEXs in 2025 is risky and irresponsible.
5. Q: “Aren’t DEXs complicated and expensive? How to trade without losing fees?”
   A: Ethereum Mainnet gas fees bite. But L2s (Arbitrum, Optimism, Base, zkSync) slashed fees 10-100x. Use DEXs there or aggregators like 1inch/Matcha. Start on L2!
6. Q: “What if a DEX/DeFi protocol gets hacked? Do I lose everything?”
   A: Risk exists but differs. On DEXs, assets stay in your wallet during trades. Hacks usually target protocol code flaws. Protect yourself: 1) Use audited, battle-tested protocols (Aave, Uniswap V3+). 2) Diversify. 3) Monitor news.
7. Q: “Did FTX kill crypto? Are investments too dangerous now?”
   A: It killed illusions about centralized “paradise.” Bitcoin, Ethereum, and core DeFi protocols never faltered. Prices dipped but recovered by 2025. Danger lies in trusting unreliable intermediaries—not crypto itself.
8. Q: “What’s the BEST 2025 wallet for beginners? Is Ledger still safe post-Recover scandal?”
   A: Ledger Nano X/S Plus (updated firmware, Recover off) and Trezor Model T/Safe remain hardware gold standards. For beginners:
   • Trust Wallet (simple, multi-chain)
   • Safe (formerly Gnosis Safe) for MPC/social recovery (advanced)
   • Phantom (Solana) / Rabby (DeFi-friendly multi-chain). Choose based on assets/experience.
9. Q: “What are regulators doing NOW? Is crypto safer?”
   A: 2025 trends:
   • Tighter CEX Rules: Proof-of-reserves, client/operational fund separation, strict KYC/AML.
   • Privacy Crackdowns: Pressure on anonymous wallets/mixers (e.g., Tornado Cash).
   • Token Classification: SEC aggressively targets tokens deemed securities.

   Safer? For CEX users—maybe, at privacy’s cost. True safety remains in self-custody/DeFi.

10. Q: “FTX’s biggest lesson? How to avoid repeating history?”
    A: Lesson #1: Your keys = your money. Self-custody isn’t optional—it’s essential. Lesson #2: Centralization in crypto is a dead-end risk. Lesson #3: Trust, but verify (via blockchain explorers!) even “reputable” names.
    Next steps:
    • Master self-custody (start small).
    • Explore DEX/DeFi (on L2s for cheap fees!).
    • Diversify storage & assets.
    • Stay informed (filter the noise).
    • Champion decentralization.

    Crypto survived its worst. Now it’s on us to build it right—on Satoshi’s principles.

Conclusion: FTX’s Collapse Isn’t the End—It’s a Necessary Course Correction

Yes, FTX’s fall (and other centralized failures) hurt. People lost money. Trust eroded. But look deeper: this crisis shattered the illusion that centralized crypto intermediaries are acceptable.

It forced us to remember: Crypto wasn’t created to build new Wall Streets with old vices. It was made to return power to people.

2025 trends are hopeful: Self-custody is mainstream. DEX/DeFi keep evolving. User-friendly decentralized tools emerge. Regulators act—but the best protection is using blockchain’s native tools: control, transparency, independence.

This path isn’t easy. Self-custody demands responsibility. DeFi requires learning. But it’s the path to real financial freedom—where “Code is Law” and “Not your keys, not your coins” aren’t slogans, but security and sovereignty foundations.

So yes, FTX’s collapse is a tragedy. But it’s also our loudest wake-up call. And in June 2025, I see our community finally waking up. That gives hope.