It's Time To Stop Making Celebrity Endorsements Your Measuring Stick For Investment Products

It's Time To Stop Making Celebrity Endorsements Your Measuring Stick For Investment Products

What do celebrities Tom Brady, Steph Curry, Matt Damon and several professional sports franchises have in common? They all recently were part of large-scale endorsement and sponsorship campaigns for cryptocurrencies, cryptocurrency exchanges or other related businesses. Curry, Brady and the Miami Heat endorsed the cryptocurrency exchange FTX.

In the ads, the celebrities pitched FTX as “the future” and related stories of their rise to the top in a thinly veiled effort to couch cryptocurrency to investors as their Super Bowl or big break. In other words, this investment was their opportunity to go for it and live the life they always envisioned for themselves. If the investment went right, they could have a fabulous life, too.

It was a compelling pitch, and investors bought in. Then the bottom fell out. It’s already been a difficult year for cryptocurrency investors, and the announcement of FTX’s bankruptcy has made it even worse. Millions of crypto investors all over the world will lose significant sums of money. While the losses are regrettable, a lesson can be learned. Your favorite celebrity’s lifetime statistics are no substitute for due diligence.

What Is FTX?

FTX is a cryptocurrency exchange. Although cryptocurrencies are considered to be decentralized because of the lack of a central bank such as the Federal Reserve or European Central Bank, there is still a need for a central exchange where cryptocurrency traders can buy, sell, invest, trade or make other financial moves with their cryptocurrency. These exchanges hold crypto wallets where cryptocurrency holders and investors keep their cryptocurrency.

Until its recent bankruptcy filing, FTX was one of the world’s largest cryptocurrency exchanges. Investors could buy, sell or trade crypto futures of all kinds. Cryptocurrency holders could even leverage the value of their cryptocurrency by borrowing against it or lending money with the profits in their coins and collecting interest. The platform also offered derivatives trading on all different types of cryptocurrencies.

FTX was founded in 2018 by exchange-traded funds (ETFs) trader Sam Bankman-Fried, a Massachusetts Institute of Technology graduate. The variety of trading options and some timely endorsements combined to make FTX blow up almost overnight. In just a few short years, it went from a small startup to one of the world’s leading exchanges.

FTX offers spot trades on nearly 300 cryptocurrencies in nine fiat currencies like the U.S. dollar, English pound, Euro Turkish lira and Swiss franc. It even issued its own token — the FTT. Aside from a very well-designed online platform, another thing that made FTX popular was that it allowed investors to leverage up to three times the value of their crypto wallets to make moves on the platform.

See also: Top 7 Best Crypto Exchanges of 2022

What Went Wrong?

The leverage and flexibility cryptocurrency offers allows investors to make a tremendous amount of money …

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