The recent collapse of “Terra” highlights why crypto needs advanced risk management systems especially if DeFi is involved. The collapse of Terra’s ecosystem, especially LUNA, shows how altcoins might outperform the stable coins in the bull run. But in the bear market, it might not be the case.
Not only that, BTC and ETH have also hit all-time lows. The collapse of the Terra ecosystem has upset both the experts and crypto enthusiasts alike. At this stage when crypto is expanding rapidly a blow like this will hurt the people’s confidence in DeFi and crypto as a whole.
LUNA and UST were the two assets that were wiped off almost completely. Everyone invested in these projects lost money and not everyone was aware of the risks when it comes to staking these algorithmic coins. There has been a history of failures in these cases but most people are unaware.
Many people have seen this as an opportunity to attack the crypto market and say that it is not a safe place for the common man.
A CEX, also known as a centralized exchange can negate most of these risks and provide safety nets too. They also protect the user from market volatility and mitigation risks too.
OKX was the only exchange that was able to protect its customers from the effects of the collapse. They notified the users of the volatility and were able to minimize damages.
More measures need to be added in the world of crypto to protect the end user from more such events. OKX’s efforts also show why there is a need for centralized exchanges even on the DeFi fronts.
