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 will be discovered.

Right here, OKX director of monetary markets Lennix Lai tells us concerning the steps crypto companies have to take to guard traders, what the business ought to be doing in another way, and the way the bear market has affected the conduct of its prospects.

1. Hiya! Powerful query to start with: Does the crypto business have a belief concern?

On the subject of the latest liquidity disaster that has considerably affected lenders, I feel there’s completely a difficulty. The issue is that cash managers have been opaque in the case of how they’re investing with customers’ funds.

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

2. What must be executed to guard traders?

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 concern by giving traders visibility into how their funds are being invested, in addition to granting them controls that embody trade-freeze degree and kill change.

The business additionally wants a renewed deal with danger administration. At OKX, we’re offering precisely this by appearing as a third-party custodian for traders and their funds.

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

The “crypto crunch” we’re seeing began with LUNA, which supplied very excessive yields for traders. 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 inside 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 conduct for the reason that bear market started? 

Many customers have change into much less lively and quieter on the whole. Traders are additionally decreasing their leverage.

6. What are the largest classes that ought to be discovered following this crypto winter?

Everybody has discovered that even the largest monetary managers can get into bother. Lenders can have discovered 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 business will evolve. The answer right here may be on-chain, or it would come from exchanges like us appearing as third-party custodians.

DeFi can 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 traders towards LUNA and UST losses. How did this work? 

Sure, that is true. OKX’s danger administration techniques detected the upcoming crash days earlier than it really occurred, after which started to alert customers and launch their property in order that they could possibly be traded or bought. This was made attainable as a result of OKX has each a devoted danger detection job drive and a number of the finest risk-management protocols within the business. 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 ought to be separating consumer monies from home funds. That could be a commonplace requirement. 

9. What are your prime priorities for shielding crypto traders within the subsequent 12 months? 

We will preserve 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 applications.