The Crypto -Ecosystem has come a long way since the implosion of Sam Bankman Fried’s FTX destroyed billions in investor wealth in 2023. However, the industry as a whole needs more to become bulletproof crypto “event held at Consensus Hong Kong on Wednesday.
“You have traditional players who have entered the room now, especially for us, most of our trade is happening with the exchange settlement, where you actually keep your assets on deputies while you are able to trade with exchanges,” Gautam Sharma , CEO and CIO of Brevan Howard said. “So the technology has come a long way ahead with regard to the last 18 months ago then, [but] There is more work to do. “
Sharma emphasized the need for 24/7 risk management, including market, counterparty and credit risks.
Counterparty risk refers to the possibility that a party involved in a transaction does not meet its obligation, resulting in a loss for the other party. This type of risk is higher in crypto than in traditional financing considering the absence of intermediaries such as banks or clearing houses that ensure confidence and settlements, and it is a concern for both directional and non-directional arbitration players.
“When we arbitrage, the counterparty risk is the most important,” said Fabio Frontini, founder of Abraxa’s Capital Management, adding that credit risk is also very important.
Frontini emphasized the importance of simulating stress test scenarios and referring to the market for eternal futures where users can lose the margin when stopped on a trade, which is not the case in traditional markets. “The [stress testing] May be very rewarding when done properly, ”added frontini.
Mike Kuehel, CEO of the market -making company Flow Traders, highlighted the need to make innovation transparent to win the investor’s trust and ensure “availability of data and move liquidity without fragmentation around it.”
“Getting the best price and giving you the opportunity to act when you want is a key ingredient,” added cowhel.
Liquidity or the market’s ability to absorb large orders at stable prices emerged as a significant concern after the collapse of FTX and its sister problem, Alameda. While the order book depth has certainly improved for larger coins, fragmentation or distribution of liquidity across multiple defi platforms, blockchains and networks, it is still a concern.
