Amid Exchange Collapses And Never-Ending Volatility, Crypto Risk Management Is More Vital Than Ever
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Institutional investors have become more cautious about investing in crypto amid a stark increase in the risks of dealing with digital currencies.
For instance, a recent report by Reuters points out that investors have become wary of doing business with many cryptocurrency exchanges, following the collapse of some of the industry’s most prestigious trading platforms. Last year saw FTX, once the world’s second-largest crypto exchange by trade volume, go bankrupt in a matter of days following a report on its lack of liquidity.
The report prompted a run on FTX, with customers scrambling to withdraw their funds from the platform. FTX didn’t have the funds available to support the huge number of withdrawals, and was ultimately forced to shut down its platform before filing for bankruptcy in the days that followed.
FTX was, however, just the most prominent of several top exchanges to fall, with others including Celsius Network and Voyager Digital also bringing their operations to a halt, leaving thousands of crypto investors unable to access funds held on their platforms.
Cautious investors have reportedly responded by switching to crypto exchanges that provide enhanced asset protection, as well as decentralized exchange platforms that don’t hold customer’s funds. DEX platforms saw a significant increase in trading volume in November, amid the wake of FTX’s collapse, because they enable customers to retain self-custody of their funds while trading, making them much safer venues for those with substantial assets.
Indeed, many crypto traders no longer trust even the biggest and most reputable centralized exchange
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