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 determine what classes will be realized.

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

1. Hi there! Powerful query to start with: Does the crypto trade have a belief concern?

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

To resolve this, we have to discover a solution 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 achieved 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 stage and kill change.

The trade additionally wants a renewed give attention to threat 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 sensible contracts that have not undergone audits. What’s OKX doing to handle this?

OKX has an inside staff that runs sensible contracts for DApps which are itemizing on our Earn platform. We’re additionally looking at third-party auditing for sensible contracts.

5. Have you ever observed any variations in buyer conduct for the reason that bear market started? 

Many customers have develop into much less energetic and quieter generally. Traders are additionally reducing their leverage.

6. What are the most important classes that ought to 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 assorted 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 is likely to be on-chain, or it’d 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 sensible contracts dictate. The issue has been folks turning into too obsessive about producing excessive yields with DeFi.

7. You declare you had been the one change that protected traders towards LUNA and UST losses. How did this work? 

Sure, that is true. OKX’s threat administration methods detected the upcoming crash days earlier than it truly occurred, after which started to alert customers and launch their property so that they might be traded or bought. This was made potential as a result of OKX has each a devoted threat detection activity 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 ought to be separating shopper monies from home funds. That may be a commonplace requirement. 

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

We’ll preserve doing what we have been doing — that’s, to proceed enhancing our threat administration methods, to proceed endeavor sensible contract audits and to maintain educating customers with our accountable buying and selling applications.