Crypto companies expect risk after collapse

Crypto companies expect risk after collapse

For cryptobauers who hope to get ahead quickly and break things, the talk about risk management tends to really destroy the mood.

But the collapse of Terra, which destroys a nominal value of $ 2 trillion from the cryptoma markets, in combination with the credit of Three Arrows Capital (3AC), which leaves a number of lenders, many crypto companies require risks to manage more effectively.

Talks with market participants show that there is no miracle weapon for risk reduction, but simple corrections could limit the extent of future market declines. Competitive crypto companies are also open to changes.

Before the latest credit crisis, many cryptobers thought of hacker prevention in risk management, Adam Zarazinski, CEO of the cryptoanalysis company Inca Digital, told Blockworks.

"If you only look at risk management and compliance through the forensics lens, look at the market with blinkers," said Zarazinski. "There is a lot more data than just the chain analysis."

Zarazinski's customers now think more about risks.

"We have seen a significant influx of crypto companies in the past few months and a half months that asked about risk management solutions," said Zarazinski.

Most companies asked for cross -market surveillance to protect themselves from risky exposure and natural language data from social media that can recognize market trends at an early stage.

The widespread leverage over crypto increases the risk

Last week Mike Novogratz, CEO of Galaxy Investment Partners, admitted that he " false "about leverage risks in crypto and suspected that only a few have recognized the extent of the dangerous exposure in the crypto room can.

"Terra was a shock for nobody who has dealt with the technology. People have had long alarm bells ringing," said Steven Goldfeder, CEO from offchain Labs. "The information was out there", where crypto companies were not trustworthy.

US government officials continue to hesitate to regulate crypto. The California representative Maxine Waters announced on Wednesday that the negotiations on a US Stable Act will be postponed until after the summer break of the congress.

"I hope people are more careful and do more care," said Anabelle Huang, managing partner of the Amber Group, "instead of saying: 'Hey, he is a crypto influencer, let me park my money with him' or 'This is the only way to give him my money, it is certainly [invest]."

Court files show that Voyager digitally granted the over-indebted hedge fund Arrows Capital an uncertain loan of $ 650 million, which led to Voyager reported bankruptcy as a 3AC.

Voyager and other investors of the 10 billion dollar fund were partially attracted by the reputation of 3AC as an accomplished deal maker.

remove the human element to stay above water

Huang has a traditional financial background (tradfi) and hopes that crypto will take up the conservative borrowing practices of tradfi. "If you have two to five times leverage, you risk being wiped out in one day," said Huang.

She also emphasized that security should be handled algorithmically to control human errors.

"Many of the losses in the crash of some credit platforms are likely to be due to the fact that they exercised human discretion during the recession or favors counterparties," said Huang.

former employees reported that Celsius' compliance department consisted of only three people, a tiny number for a crypto bank who managed assets of $ 25 billion at one point.

The strengthening of risk management requires bear market investments from crypto companies.

Each of the companies that Blockworks spoke to should above all try to hire additional full -time staff for risk management.

"Companies are a bit nervous to spend money, but they all know that they need more risk management," said Goldfeder.

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The article Crypto firms Reckon with Risk Following Collapse is not a financial advice.