With institutions collapsing in succession, how should risk management be handled in the crypto market?
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With institutions collapsing in succession, how should risk management be handled in the crypto market?
Whether launching third-party risk management tools or continuously innovating against the market trend, all these efforts demonstrate the technical capabilities and industry responsibility of established exchanges.
Navigating Web3 tides with focused insightsAuthor: x0tree
In the summer of 2021, a popular saying circulated in the industry: "Right now, we're making money from the U.S. dollar's 'liquidity injection'."
The bull market in the crypto space was driven by this “liquidity injection” combined with high leverage, while the bear market emerged through “draining liquidity” and deleveraging.
I. Chain Reaction of Institutional Collapses
Since March this year, to combat inflation, the Federal Reserve has aggressively raised interest rates—25 basis points in March, 50 in May, and 75 in June, marking the largest single rate hike since 1994 in the United States.
Since May, the cryptocurrency market, which had previously benefited from the U.S. dollar’s “liquidity surge,” has been in constant turmoil: first came the collapse of Luna’s $40 billion financial empire; then Lido, the largest decentralized staking pool for ETH 2.0, experienced derivative de-pegging; Celsius, the largest crypto bank in the U.S., fell into a liquidity crisis; and most recently, Three Arrows Capital, holding billions in crypto assets, faced massive liquidation. The liquidity crisis triggered a domino effect across the industry.
Beyond visible on-chain DeFi liquidations, rampant unsecured, high-interest inter-institutional lending among CeFi platforms like BlockFi and PayPal during the bull market undoubtedly exacerbated the crisis. The characteristics of high leverage, lack of collateral, and opacity not only put users’ funds at risk but also led to severe issues such as liquidity crunches and insolvency, plunging the industry into a trust crisis.
Current reflections focus on criticizing institutions that excessively leveraged themselves through endless recursive borrowing during the bull market—particularly aggressive behavior within the largely unregulated CeFi sector, which operates as hidden time bombs. But we must ask: does real risk control exist in the crypto market when facing extreme volatility? And if so, how should it be implemented?
II. Risk Management According to Industry Veteran Exchange OKX
In response, a senior executive overseeing OKX’s wealth management products stated: “Risk control is not a complicated technical issue—it hinges on a company’s value of using technology for good.”
This may sound abstract, yet it was precisely this principle that enabled OKX to help users avoid disaster during the Luna crash.
On May 8, when LUNA dropped to 65 USDT and UST briefly de-pegged for the first time, OKX’s risk control system was immediately triggered. The exchange promptly activated its automatic redemption mechanism, redeeming all user assets from the blockchain and disbursing funds, while simultaneously issuing risk warnings via app notifications, email, and Twitter. Tens of thousands of users were affected in this event. By the time redemptions were completed, UST was trading at 0.996 USDT—effectively minimizing user losses.
Social media influencer Super Jun even shared on his personal platform: “I held UST or related financial products on both OKX and other exchanges, but only the portion on OKX was automatically returned due to risk controls, while funds on other platforms couldn’t be withdrawn and were ultimately lost.”
To some extent, the Luna incident illustrates that inexperienced investors are often helpless when risks emerge, making the choice of a trustworthy trading platform critical—not just selecting a financial tool, but also seeking the security provided by brand reliability.
"The underlying logic of these CeFi financial products is quite similar. Whether retail or institutional, fund safety must come first!" remarked an experienced quantitative trader. He emphasized that both investing and trading require platforms that have undergone multiple stress tests and remain highly sensitive to market risks.
Platforms like OKX, with ten years of industry experience, having grown alongside the sector and weathered multiple market cycles, truly deliver this sense of security to users when industry-wide trust crises erupt.
"Our tech-for-good values constantly remind the team to prioritize users’ actual interests above all," revealed the product lead. From the outset, the R&D team anticipated the risk of algorithmic stablecoins like UST de-pegging and specifically designed a special risk-control redemption mechanism: whenever abnormal price fluctuations occur, the system automatically evaluates on-chain activities and initiates redemption. Continuous risk alerts are issued through product interfaces and social media. If price volatility exceeds preset thresholds, new subscriptions are suspended—maximizing the balance between user returns and potential risks.
III. Taking Responsibility and Persisting in “Counter-Cyclical” Innovation
"Users subscribe to our products, and we bundle those funds for on-chain investment primarily to save gas fees. We never use user funds to increase leverage," admitted the official. Users choose OKX not only because of the convenience of tools but also due to the risk-monitoring capability backed by the OKX brand.
OKX’s strong performance in risk monitoring stems first from mature risk awareness and detection technologies; second, it reflects the company’s DNA—OKX has always been a product-innovation-driven exchange where technological strength serves as the core engine of business growth.
As industry experts note, OKX moves steadily and remains low-key. Veteran exchanges that have endured market ups and downs likely understand restraint better when confronted with markets full of financial temptations.
This “restraint” shows clearly during frenzied bull runs, while resilience manifests in launching new products during bear markets.
According to official announcements, OKX will launch TUSD DeFi Earning services on June 27. This low-risk stablecoin wealth management product launched during a bear market allows users to stake TUSD with one click and earn yield, offering an estimated annualized return of 8%, with flexible deposit and withdrawal options.
The estimated annualized return consists of two parts: on-chain earnings and platform subsidies. On-chain earnings are updated daily based on actual performance and distributed upon redemption. The platform subsidy offers an annualized 6.5%, paid out daily as rewards. These subsidies are funded by the TUSD project team as limited-time incentives, dynamically adjusted based on subscription volume and budget availability.
However, the product team also reminds users: the on-chain returns for TUSD DeFi Earning come from the Compound protocol integrated by OKX. OKX only provides project display and revenue distribution services and assumes no liability for asset losses arising from smart contract vulnerabilities, hacking incidents, or project team defaults.
TUSD is a collateral-backed stablecoin, subject to real-time audits by accounting firm Armanino. Audit reports, collateral ratios, and reserve information are updated in real time and publicly accessible. TUSD’s price is influenced by market supply and demand. OKX does not guarantee its price stability, and users must acknowledge and bear the risk of potential de-pegging.
Still, should any unusual movement occur, OKX will, as always, issue immediate alerts and strive to assist users in redeeming their assets as quickly as possible to minimize losses.
Beyond introducing new products counter-cyclically, OKX has also developed thoughtful initiatives and taken concrete actions regarding the broader industry trust crisis triggered by repeated institutional collapses.
OKX believes the core issue today lies in the absence of trusted third parties to assist with risk management, liquidation, and auditing—critical elements for mitigating systemic risks in the crypto industry. Therefore, OKX has launched the industry’s first transparent asset management tool—the Sub-Account Custody Trading feature.
At its core, this function offers users a simpler and more transparent sub-account management solution. Particularly beneficial for large-scale projects, asset managers, and high-net-worth investors, they can now use trading sub-accounts to monitor the real-time movements of entrusted funds, enabling timely identification of risks.
Overall, whether launching third-party risk control tools or persisting in “innovation” amid adverse market conditions, every action reflects this veteran exchange’s technical capabilities and sense of industry responsibility.
Returning to the initial question: does effective risk control exist in the crypto market? The answer is clearly yes. But how can risk management be improved? Perhaps OKX’s practices and its tech-for-good philosophy offer valuable insights to the industry. As its product lead puts it: implementing risk control technology isn’t hard, nor is cultivating risk awareness—but adhering to the principle of putting customer interests first and maintaining the初心 (original intention) of doing no harm—that’s what’s truly difficult.
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