Q&A: What lessons must be learned from the crypto crunch?

It has been a bruising few months for the crypto markets. However with issues starting to stabilize, there’s now a chance to take a step again and work out what classes could be realized.

Right here, OKX director of monetary markets Lennix Lai tells us concerning the steps crypto companies must take to guard buyers, what the trade must be doing in a different way, and the way the bear market has affected the habits of its prospects.

1. Hey! Robust query to start with: Does the crypto trade have a belief situation?

In the case of the current liquidity disaster that has considerably affected lenders, I believe there may be completely a problem. The issue is that cash managers have been opaque in relation to how they’re investing with customers’ funds.

To unravel this, we have to discover a option to separate shoppers’ tokens from managers’ in-house wallets whereas guaranteeing that these managers fulfill their duties to each their shoppers and the associated communities. Traders must have data of how their funds are being staked, traded or used as collateral.

2. What must be performed to guard buyers?

Traders want each higher transparency into how their funds are being invested and higher management over how these investments are being dealt with. Platforms like OKX’s Custody Buying and selling Sub-Account repair this belief situation by giving buyers visibility into how their funds are being invested, in addition to granting them controls that embody trade-freeze stage and kill swap.

The trade additionally wants a renewed concentrate on danger administration. At OKX, we’re offering precisely this by appearing as a third-party custodian for buyers and their funds.

3. And we have seen one thing of a “contagion impact,” with the downfall of 1 venture affecting others?

The “crypto crunch” we’re seeing began with LUNA, which provided very excessive yields for buyers. From there, we have seen different high-yield prospects and lenders like BlockFi and Celsius crashing. The liquidity squeeze is what’s contagious. 

4. We have seen points surrounding good contracts that have not undergone audits. What’s OKX doing to handle this?

OKX has an inner workforce that runs good contracts for DApps which can be itemizing on our Earn platform. We’re additionally looking at third-party auditing for good contracts.

5. Have you ever observed any variations in buyer habits because the bear market started? 

Many customers have turn out to be much less lively and quieter normally. Traders are additionally reducing their leverage.

6. What are the most important classes that must be realized following this crypto winter?

Everybody has realized that even the most important monetary managers can get into bother. Lenders can have realized to not underestimate the liquidity dangers of varied tokens, like within the case of Celsius with ETH 2.0.

Regardless of all of this, I am assured that the trade will evolve. The answer right here may be on-chain, or it’d come from exchanges like us appearing as third-party custodians.

DeFi can also be being criticized, however DeFi protocols have been liquidating positions simply as their good contracts dictate. The issue has been folks turning into too obsessive about producing excessive yields with DeFi.

7. You declare you have been the one alternate that protected buyers in opposition to LUNA and UST losses. How did this work? 

Sure, that is true. OKX’s danger administration techniques detected the approaching crash days earlier than it really occurred, after which started to alert customers and launch their belongings in order that they might be traded or offered. This was made doable as a result of OKX has each a devoted danger detection process drive and among the greatest risk-management protocols within the trade. Altogether, OKX protected greater than 500 million UST belonging to greater than 9,000 customers.

8. Do regulators want to make sure that retail funds are separated from institutional funds within the crypto house? 

Funds must be separating consumer monies from home funds. That may be a commonplace requirement. 

9. What are your prime priorities for safeguarding crypto buyers within the subsequent 12 months? 

We’ll hold doing what we have been doing — that’s, to proceed enhancing our danger administration techniques, to proceed enterprise good contract audits and to maintain educating customers with our accountable buying and selling packages.