Bitcoin Forum

According to this news article (https://www.cbsnews.com/news/bankruptcy-filings-2022-company-personal-epiq/), there was an increase in the number of individuals and businesses who filed for bankruptcy by 20% in January from a year ago.

Some companies that have filed for bankruptcy are:
-Voyager Digital
- Revlon
- Three Arrows Capital
- Cineworld Group
- FTX Trading
- BlockFi
- Celsius Network

Why did they file for bankruptcy?
- rising interest rates
- high inflation
- Difficulty hiring
- ongoing war in Ukraine

With all these things going on, I have been thinking to myself, "Is there an opportunity here?" Entrepreneurs have been characterized as people who can think outside the box. Steve Nickles, a law professor at Wake Forest University, has already said that "bankruptcies leave gaps for entrepreneurship." What do you think could be the opportunity is here for entrepreneurs?

---

My References
1. www.vigourtimes.com/bankruptcies-climb-as-pandemic-aid-vanishes/
2. www.breakingnewsworlds.com/with-pandemic-aid-gone-more...ews-today-32431.html
3. www.bollyinside.com/news/business-news/when-epidem...ruptcy-filings-rise/
4. www.indiatimes.com/worth/news/crypto-firms-who-fil...nkruptcy-591270.html
5. www.thetimes.com.ng/2023/02/bankruptcies-rise-as-p...emic-aid-disappears/

There's always opportunities, for the right mind that is. However, to be able to launch something in the midst of a economical crisis, then it has to be something rather special, and make sure that it can withstand the different pressures right now. The thing is, running a business is actually extremely difficult at the best of times. Unless, you have a service or product that revolutionizes something or is just in the right time, and the right place; it'll be extremely difficult to do so.

Although, having said that; Bitcoin offers a unique situation where not all services are available at the moment, and therefore you can sort of learn from the mistakes of popular fiat companies, and potentially create a service based of the successful ones. Honestly, a trustworthy way of paying for your rent or mortgages would be appreciated, but then most users here would rather withdraw their Bitcoin from an exchange, and just pay via a direct debit into their mortgage/rent.

You're right though, there's an opportunity to be had not because of the current economical situation we find ourselves in, but the fact that Bitcoin still hasn't matured enough to have its commercial boom. 

All of these reasons (and many more) why many big companies filed for bankruptcy and folded up would still affect any entrepreneur (new or old) in the market, all these problems is what is prevalent today and isn't peculiar to any business model. But notwithstanding you can always say there is an opportunity for entrepreneurs to make the most of any situation, but it is not just as easy as saying it, starting a business can be pretty daunting, and the current global economic situation makes things even more difficult.

I'd not agree that now is the right time to start a business from scratch, prolly people who already have businesses prior can seek ways to implement additional features that could help generate more capital for the sustenance and growth of their business, but to throw yourself in the mix of it all considering what the economic situation is, and with the already extant competition, you might be knocked out of business pretty quickly.

It's the initial money you need to start the majority of businesses, and when there's a economical crisis' going on, less people have that sort of money, and even if they did businesses usually take a lot of your time, and if you haven't got another job at the same time, you'll burn through that money real quick. Since, a lot of people don't pay themselves for the first year or so when starting a business. It entirely depends on the business obviously. If there's high demand for it, then you could get lucky.

However, with some of the examples given in the original post, exchanges aren't cheap to just make, and no entrepreneur will have the bank roll for that or the trust required either. 

This might be a little off topic, or outside the scope of what you're trying to discuss here but I felt it important to bring up.  While in theory, and for many individuals as well as businesses, bankruptcy is a good thing, and can be quite helpful.  However there's some big negatives to it.  Scammers can easily open up LLC's, file for bankruptcy and simply repeat the process over and over.  So, like many good things in life, it's taken advantage of far too often.

Why not, there are many opportunities for learning what to do and what not when you become an entrepreneur. As a person of business one should always have back up plans A to Z so that one can tackle the situation like those mentioned in the OP. There are big companies and small companies as well who manage their business way advance with modern roadmaps. They always have plans on what to do if situation such as inflation / high interest rate occurs and to what level they can drop the revenue and still run the business in proper way possible.

With the marking of inflation they will pull out smart moves and still keep business operations running as it is. Any company that is under managed will reach the doors of bankruptcy but not the one that I mentioned above.

The biggest difference compared to old times is that there used to be a lot more companies who would buy other companies that did badly. So if you owned a company that had any potential but no money, someone with money would come to you and pay you a small sum, allowed you to walk away with "something" instead of nothing, and you would say "I sold my company" instead of "I bankrupted my company" thanks to that person. Then they would takeover, fire thousands, sell assets, and make a profit out of it, or they could manage it better if they want to but that rarely happened. These ruthless takeovers are not being done now, because why spend your money making chump change when you can make that much with just bank interest, FED increasing rates caused companies to bankrupt more frequently. Thats not the only reason, but a pretty big one.

None of the above!

FTX failed because it was a scam. They were stealing money from users, trading while intoxicated, donating people's money to politicians...
All the companies that held money with FTX, or had loans with them went bankrupt because they did not realize it was a scam, or did not bother to check.
Things like employment rates or war had nothing to do with it.

There's more than one lesson to be learned from this.
Don't trust, but verify.
Don't hold coins on exchanges.
Not your keys, not your coins.

It gives opportunities, but not during this year, but in the long term. Wars and economic, political and financial crises were the beginning of many great companies.
Many cryptocurrency exchanges have closed down or gone bankrupt, but they will open the door to new platforms as long as the market thrives in the long term.

As for the short term, things will be tough for everyone.

When general motors faced bankruptcy back around 2009, the acting CEO was asked to step down and was replaced by Ed Whitacre. Ed was tasked with restructuring the giant automaker to make it profitable once again. Ed Whitacre got rid of the GM private jet which could cost as much as $50,000 per flight. He reformed GM's corporate culture of excess and extravagant spending. Which was sometimes defined by company funds being used as a personal slush fund by corporate execs. The GM which emerged as a result, could sustain itself once again.

To some extent, we might say the same negative precedents GM struggled with in 2009 have intensified more than a decade later. Leading to many billion dollar business ventures failing. It can be observed in the change in twitter policy from previous CEO Parag Agrawal to current acting CEO Elon Musk. The best and the brightest are usually not in positions of power. The janitor scrubbing floors, could potentially be more intelligent, resourceful and harder working than the CEO running the business. (Irony being what it is, there was a man with one of the highest IQ's ever measured who was actually a janitor.)

Within the last 50 years, we have seen many small businesses succeed to become multi national billion dollar industries. The overwhelming majority of our progress and innovation is coming from the bottom, rather than the top. Perhaps the trend will continue, or accelerate? Or it could trend in the opposite direction. If anything is certain, it is that the majority of our failures and bankruptcies are stemming from the culture of excess and extravagance which defining a privileged upper class.

I'd consider COVID related matters to be the biggest driver of bankruptcy within the last two years. Interest rates, inflation, labor shortages are all a result of COVID lockdowns causing the government to begin printing money as a form of economic stimulation. All the meanwhile, businesses are forced to close down.

To the extent government can force you to close your business, I don't know what an entrepreneur is suppose to do to combat that. Being flexible with e-commerce might be a mitigating factor but that isn't feasible for a lot of businesses.

COVID is a symptom of economic problems, just contributing to its exaggeration and acceleration, and therefore, and if we did not, we would have seen that we were in this situation in the year 2030 or closer.
Countries quickly recovered from the effects of the epidemic and the high energy prices will make all the solutions of governments useless.
Therefore, even closures were an opportunity for companies to diversify their traditional way.

Nickles' point is a good one. Failure, especially on the scale of massive, national economic failure, leaves opportunities for new ventures to take hold in the market space that were previously unavailable.

In short, yes. As entrepreneurs and business people in general, we need to look for opportunities even during troublesome times. In the process of moving forward, sometimes we are bound to come across some adversaries along the way. For me, I believe that a valuable lesson from the Chapter 11 experience is never stop pushing forward because of fear. If you do, you will miss out on countless opportunities in life. That means if we can properly position yourself for success when existing conditions are changing so rapidly.

Bankruptcy started right after the second worst wave during the covid when whole world stood still and Governments were not understanding on what to do about it?

Imagine whole supply chain from multi-national routes, whether sea or air were stopped and billions of dollars worth transactions suddenly went to zero. This was definitely a seeding activity for the economic crash and start of inflation during that point.

The factors which OP mentioned were not responsible for it, but they got initiated due to pandemic after effects. Excluding WAR situation others were definitely the reasons for same.  Now, when the War broke out it was aggregating factor because it involved one of the biggest supplier of oil which again is one of the crucial fuel to drive the economy world wide.

In short everything was inter connected and it started that very chain reaction to make businesses go bankrupt.

I agree with your points @ Gyfts. Most of the challenges that the world is facing now regarding sloggish economy is as a result of the COVID pandemic. It grind the major manufacturing countries of the world and that caused production to drop, the effect of which is scarcity of goods and services then the available will become very expensive to get, causing artificial increase in value. Before the covid year in 2020, the rate of inflation was not as double as it is now meaning COVID-19 challenges was attributory to the effect now, production and supply chains are not what they are used to.

First of all, the companies you stated are filing bankruptcy mainly not because of the reason you stated. Are you sure that FTX's bankruptcy is caused by interest rates, inflation, people, and war, not by sole negligence by its team and CEO? I doubt so.

What some people, entrepreneurs, could do is to self-reflect and learn from the recent FTX contagion. The problem is not merely because of the external factors that you have mentioned, but, the lack of regulation for centralized entities that run within cryptocurrencies spaces, FTX, and Celcius can be included. So does, the user who wasn't aware much about such risk. By scrutinizing what doesn't work, everyone can prevent such kind of mistakes.

I think the real one to be blamed here is not the Covid-19 but it's the FTX bankruptcy because after this, other companies then follows its path. It was like there was a Domino effect that have happened. During the time FTX went bankrupt, the world have already recovered from Covid.

We should not defend FTX but the reason why FTX got bankrupt is already given and that is because the founder is playing carelessly with his costumer's funds. He did trading, investing, gambling and then donating some of it to the governments without their customers' consent. Speaking of the governments, they can only order you to close your business if it's illegal but if not then maybe the owners close them due to the effects of the recession.

There are so many things to learn from companies falling for bankruptcy especially as a result of mismanagement of funds. So many things are happening I'm our world with lessons to learn from them. Entrepreneusrs need to learn from many of the bankruptcy that is happening just like you have mentioned like the one of FTX had rendered many investors in to doom.
There are so many events like this that had happened nit even in the cryptocurrency atmosphere but in the circular world.

Mismanagement of funds is but just a tip of reasons that can make a business fail or bankrupt. Poor managers with poor people skills, and an unchecked financial record that keeps track of expenses and investment, are among other reasons too.
The FTX saga is purely the blame of the owners because they failed to realize that the customers money isn't theirs and didn't invest diligently. Am sure no regulatory body nor board members cautioned or interfered in how the owner used clients money, and this is one big lesson to learn from, because people learnt to pay closer attention to online investment and investors and governments enforced strict agencies and bodies to monitor huge businesses with customers money.
I learnt from people's stories that while money comes and goes, it is always better to have financial discipline and knowledge of likely products or services to diversify once financiers begin to follow in bankrupt light.

A lesson that economics and entrepreneurs can learn from bankruptcy is that Bankruptcy is still very much a possibility for businesses and companies no matter how secure and safe they may think they are against it. Entrepreneurs who do not expect benkruptcy are usually the ones that are affected easily and easily get bankrupt. Economics and entrepreneurs that accept the possibility of bankruptcy, make better preparations to ensure that they do not find themselves and their business bankrupt. Do not wait until you are about going bankrupt to prepare against bankruptcy, prepare for bankruptcy so you can avoid it.

Covid is a huge influence on the world of the economy which all turn off when infected with Covid everyone is isolated at home while the needs continue to increase. But maybe the company is unable to maintain it because the company's management is poor or uncontrollable outbody so that there is no income to the company. And there are many new breakthroughs and better innovations than other companies so that the bankrupt company intensively declined.

The reason for all the above bankruptcies is the overconfidence and inadequacy of legal entities and individuals during the bull market. 

When you operate in such a chaotic and risky market, you must follow all risk management requirements very carefully and methodically. 

However, these individuals and legal entities negligently disregarded these requirements.  There are usually a lot of bankruptcies during a long bear market.  At the same time, new companies get the opportunity to occupy the vacated business niches. 

This is an opportunity not to be missed.  The bear market will inevitably end.  It will be replaced by a bull market.

Tightening financial cryptocurrency market regulation will surely help those kinds of issues, in the other hand, the user should be aware they have better choices and the recommended way to truly use and store cryptocurrencies, which is, to do it in a non-custodial way. And simply use the exchange to trade, not store funds.

It is generally a bad idea, to even diversify a service/platform to use, even if we know deeper about it there is no guarantee the companies financial are in a healthy condition. We technically have a better option to manage it on our own.

The bankruptcy of a company shows a gap that can indeed be repaired in the eyes of people who are able to see it from a different angle. For business people, this is a challenge in itself, as well as testing their credibility to show what needs to be improved from this flawed system. Every gap there is always a way to be repaired and for business people this is commonplace. But of course, it all does not escape the big risks. Let's say a businessman has many investors, by fixing the loss gap he can attract investors who have worked with him for a long time so it's easy to lose their money. He is risking a proven reputation in the eyes of investors.

Both FTX, Voyager Digital, Three Arrows Capital, etc are sectors for the entry of new investors who have invested large amounts of money and are able to attract the public to rebuild trust.

Sustainability and adaptability.
Business owners are not putting that much of attention to the overall sustainability of a business. Trends do shift from one to another and if you are really an emtrepreneur, you should be ready with every changes to happen at your field, this is where adaptation should take place. In most of the instances, bankruptcy simply represents decline with the demand on what you are offering or simply, it is no longer selling to your target market. Sustainability speaks in general; employee, service, rent, expenses and other factors which serves your business to continue running.But as we have observed, many entrepeneurs became rich because of the pandemic. They managed to improvise and make use of the situation and that is simply what makes them an entrepreneur; using resources available and sell it to the population.

Yes, I agree Although Sustainability is not a matter of having enough capital to survive but more important is the OP's ability to be flexible in terms of adapting to change. This takes a lot of insight and innovation to happen. Always remember that we will always be no better than the market wants us to be, so let the market decide what matters and what they need.

As for the lesson for entrepreneurs, it's best to avoid greed and complacency. Greed is always the step before bankruptcy, paying too much attention to our money should not be a major concern.

Your business must be a priority and find ways to sustain it as long as possible. Learn from successful people who have experienced failure and learn how they continue to do their business better than before. This will help you become a successful entrepreneur who is ready to face every challenge that lies ahead.

I don't think that those are the main reasons why these companies went bankrupt.
FTX was a scam. The other companies also made some irresponsible financial decisions, risking their investor's money.
Almost all the crypto companies in this list had business models, that weren't sustainable and risked everything hoping for bullish crypto market.
An then, the crypto winter came... I don't really think that the crypto winter came because of the war in Ukraine. Back in February-April 2022, the Bitcoin price was moving between 34K and 44K USD. Yes, the war in Ukraine influenced the global markets in a negative way, but the influence is exaggerated.

Many happened in the past year and bad news everywhere including war and economic recession. Covid pandemic, tech sector that a lot of people. and yeah most of the news is economic things. Domino effect too. Especially in the crypto industry.

But there is always opportunity if we can spot one and we can learn from past mistakes from what they doing. Maybe we will find a better solution or anything else. Including what we gonna do with our money after Ftx happened.