{"id":451048,"date":"2022-05-22T16:16:00","date_gmt":"2022-05-22T13:16:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/terras-meltdown-highlights-benefits-of-cex-risk-management-systems\/"},"modified":"2022-05-22T16:16:00","modified_gmt":"2022-05-22T13:16:00","slug":"terras-meltdown-highlights-benefits-of-cex-risk-management-systems","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/terras-meltdown-highlights-benefits-of-cex-risk-management-systems\/","title":{"rendered":"# Terra\u2019s meltdown highlights benefits of CEX risk-management systems"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a36ea3deb315\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a36ea3deb315\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/terras-meltdown-highlights-benefits-of-cex-risk-management-systems\/#%E2%80%9D_Terras_meltdown_highlights_benefits_of_CEX_risk-management_systems_%E2%80%9C\" >&#8221; Terra\u2019s meltdown highlights benefits of CEX risk-management systems &#8220;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/terras-meltdown-highlights-benefits-of-cex-risk-management-systems\/#A_huge_blow_to_industry_confidence\" >A huge blow to industry confidence<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/terras-meltdown-highlights-benefits-of-cex-risk-management-systems\/#Regulators_took_the_bait\" >Regulators took the bait<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/terras-meltdown-highlights-benefits-of-cex-risk-management-systems\/#The_role_of_CEXs_in_the_risk_management_and_user_protection\" >The role of CEXs in the risk management and user protection<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/terras-meltdown-highlights-benefits-of-cex-risk-management-systems\/#Why_risk_management_matters_in_crypto\" >Why risk management matters in crypto<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_Terras_meltdown_highlights_benefits_of_CEX_risk-management_systems_%E2%80%9C\"><\/span>&#8221; Terra\u2019s meltdown highlights benefits of CEX risk-management systems &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div class=\"post-content\" data-v-2a0745c6>The collapse of Terra\u2019s ecosystem \u2014 namely, native coin LUNA and algorithmic stablecoin TerraUSD (UST) \u2014 rocked the wider blockchain and cryptocurrency ecosystem. Not only did Terra-ecosystem tokens (such as Anchor\u2019s ANC) collapse in value, but the widespread fear, uncertainty and doubt sent market-leading cryptocurrencies Bitcoin (BTC) and Ether (ETH) below $27,000 and $1,800, respectively, on some exchanges.<\/p>\n<p>As of the time that I\u2019m writing this article, the cryptocurrency market still hasn\u2019t recovered \u2014 even if Terra\u2019s contagion has been mostly contained.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>What h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ened? Terra debacle exposes flaws plaguing the crypto industry<\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_huge_blow_to_industry_confidence\"><\/span>A huge blow to industry confidence<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Crypto market participants \u2014 and especially those involved with LUNA and UST \u2014 were <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/learn.okx.com\/en\/insights\/death-of-an-algorithmic-stablecoin-lessons-from-the-luna-meltdown\/\">wiped <\/a>out in the collapse of the two assets. For people who were staking the supposedly safe \u201cstablecoin\u201d tenuously pegged to the dollar to earn interest, the UST death spiral was absolutely brutal. Not just hedge funds, but regular individuals lost a lot of money. In some cases, they lost their life savings. <\/p>\n<p>Unfortunately, most regular users (and even some of the hedge funds) were unaware of the risks involved with staking algorithmic stablecoins, despite a history of experimental failures on the algo-stable front and no successful implementations.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-05\/116e3863-643d-4ab9-bdcb-12180405c2e9.png\"><\/figure>\n<h2><span class=\"ez-toc-section\" id=\"Regulators_took_the_bait\"><\/span>Regulators took the bait<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Regulators were quick \u2014 almost too quick \u2014 to use Terra\u2019s dramatic unwinding as an example of why stablecoin (and decentralized finance) regulation is required. United States Treasury Secretary Janet Yellen was quick to mention the event in a Congressional hearing of the House Financial Services Committee on the Financial Stability Oversight Council\u2019s Annual Report to Congress, where she requested lawmakers develop a \u201cconsistent federal framework\u201d on stablecoins in an effort to address risks. <\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>DeFi: Who, what and how to regulate in a borderless, code-governed world?<\/em><\/strong><\/p>\n<p>Yellen\u2019s comments are relatively tame when compared to Senator Elizabeth Warren\u2019s, who has repeatedly lambasted decentralized finance (and, by and large, crypto) as an industry run by \u201cshadowy super coders\u201d and criminals. The lawmaker also recently wrote with Senator Tina Smith that \u201cinvesting in cryptocurrencies is a risky and speculative gamble,\u201d among other things. Reading between the lines, Terra\u2019s collapse is throwing fuel on Congressional crypto critics\u2019 fires.<\/p>\n<p>The picture being painted by some lawmakers \u2014 and certainly not just by those in the U.S. \u2014 is that the crypto industry is a dangerous place for people to invest their money. They often cite a lack of regulations, user protections and risk-mitigation systems (when not busy falsely stating its primarily used by criminals). <\/p>\n<p>However, this painting isn\u2019t exactly a realistic one.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_role_of_CEXs_in_the_risk_management_and_user_protection\"><\/span>The role of CEXs in the risk management and user protection<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The old \u201cWild West\u201d days of the cryptocurrency industry are long-gone \u2014 at least, in the centralized exchange (CEX) space. Many advanced trading platforms with centralized order books do, in fact, provide safety nets and risk-mitigation measures with the sole purpose of protecting their users from severe market volatility. <\/p>\n<p>As an example, in the wake of the crypto market collapse around LUNA and UST last week \u2014 which was devastating for so many crypto investors and traders \u2014 OKX stood out as cryptocurrency exchange that was able to protect its customers from the brutal effects of the meltdown.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-05\/f7750067-95b1-4556-b944-f9a4c2817cac.png\"><\/figure>\n<p>I\u2019ll explain how that worked \u2014 OKX\u2019s risk-management system accomplished this by first noticing the price volatility of LUNA and sending an email alert to all investors who were staking UST on OKX Earn, the exchange\u2019s crypto-earning aggregator platform that includes DeFi earning offerings. Over two phases, OKX released over 500 million UST belonging to over 9,000 investors. The price of UST during these two phases was $0.99 and $0.8. OKX also notified Earn users that their UST had been released from staking.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Risk management in crypto: Aka \u2018the art of not losing all your money\u2019<\/em><\/strong><\/p>\n<p>Releasing\/unlocking investors\u2019 UST from being staked via OKX Earn gave investors a chance to avoid further loss on their UST, which failed to maintain its peg to the dollar.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Why_risk_management_matters_in_crypto\"><\/span>Why risk management matters in crypto<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The Terra collapse and wider effects on the cryptocurrency market demonstrate why crypto exchanges need advanced risk management systems \u2014 especially when providing access to decentralized finance (DeFi) protocols offering favorable yields. The response of OKX\u2019s risk management system, which gave traders a chance to be protected by the effects triggered by the severe volatility in the markets, highlights the benefits of using a centralized exchange platform for \u201cdoing DeFi.\u201d Instead of \u201cgoing it alone,\u201d so to speak, and staking on Anchor or other protocols, utilizing a CEX\u2019s offerings may offer user protection and risk mitigation if and when things go wrong for the protocol in question.<\/p>\n<p>Of course, there must be a balance between the founding values of crypto \u2014 independence, decentralization, freedom, \u201ctrustless\u201d security \u2014 and risk mitigation for people and companies who want to invest in, earn or trade crypto. At the end of the day, we all want everyone to have safe and independent access to the ever-growing world of crypto. However, not everyone is ready (or even wants) to take on all the risks themselves. <\/p>\n<p>Centralized exchanges still have a major role to play in facilitating safer access to decentralized finance through advanced risk-mitigation systems. As more and more new people enter the exciting world offered by blockchain <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a>, we can provide guidance, expertise and risk-mitigations to help ensure that \u2014 at the end of the day \u2014 they stick around.<\/p>\n<p class=\"post-content__disclaimer\"><em>This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.<\/em><\/p>\n<p class=\"post-content__disclaimer\"><em>The views, thoughts and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Lennix Lai<\/strong> is the managing director of OKX. He leads the business strategy and operations for OKX, internationally. Before joining OKX, Lennix served at JP Morgan, AIG and Cash Financial Services Group. With 15 years of experience in the worlds of financial services and fintech, Lennix plays a key role in OKX\u2019s transformation from a standard centralized exchange into the largest hub for DeFi services, nonfungible tokens and blockchain gaming \u2014 as well as crypto trading.<\/div>\n<\/div>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/terra-s-meltdown-highlights-benefits-of-cex-risk-management-systems\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; Terra\u2019s meltdown highlights benefits of CEX risk-management systems &#8220; The collapse of Terra\u2019s ecosystem \u2014 namely, native coin LUNA and algorithmic stablecoin TerraUSD (UST) \u2014 rocked the wider blockchain and cryptocurrency ecosystem. Not only did Terra-ecosystem tokens (such as Anchor\u2019s ANC) collapse in value, but the widespread fear, uncertainty and doubt sent market-leading cryptocurrencies&#8230;<\/p>\n","protected":false},"author":1,"featured_media":451049,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDUvMGQ2ZmVhN2EtMWJmNC00Zjg5LWFmMTMtNWYxM2FjYzMzMmUzLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74867,74894,74863,74868,122378,74355,70934],"class_list":["post-451048","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-altcoin","tag-blockchain","tag-cryptocurrencies","tag-defi","tag-terra","tag-adoption","tag-regulation"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/451048","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=451048"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/451048\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/451049"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=451048"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=451048"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=451048"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}