Crypto Industry Moves Beyond FTX Collapse, But 24/7 Risk Management Remains Key
HONG KONG – While the crypto market has significantly matured since the 2023 collapse of FTX, industry leaders at Consensus Hong Kong stressed that constant risk management is essential to ensure long-term stability.
Speaking at the “Views From Wall Street to Crypto” panel, Gautam Sharma, CEO and CIO of Brevan Howard Digital, highlighted how institutional players have helped improve trading infrastructure.
“Off-exchange settlement is now widely used, allowing traders to keep assets with custodians while executing trades on exchanges,” Sharma noted. “Crypto has come a long way in the past 18 months, but full resilience is still a work in progress.”
Sharma emphasized that managing market risk, counterparty risk, and credit risk on a 24/7 basis is critical in the crypto space.
Counterparty Risk Still a Major Concern
Unlike traditional finance, where clearinghouses ensure smooth settlements, crypto trading lacks intermediaries—raising concerns about counterparty risk.
“When executing arbitrage strategies, counterparty risk is the most important factor,” said Fabio Frontini, founder of Abraxas Capital Management. “Credit risk is another key consideration, particularly in highly leveraged markets.”
Frontini also stressed the importance of stress testing, particularly in crypto derivatives trading. “Crypto’s perpetual futures market behaves differently from traditional markets. If you’re stopped out, your margin can be wiped out—so you need to be prepared for extreme volatility,” he said.
Liquidity Fragmentation Challenges Institutional Adoption
Institutional investors require deep liquidity to execute large trades efficiently, but market fragmentation across exchanges, blockchains, and DeFi platforms remains an obstacle.
“Transparency is crucial for institutional adoption,” said Mike Kuehnel, CEO of Flow Traders. “Investors need confidence in pricing mechanisms, execution quality, and the ability to transact seamlessly.”
While major cryptocurrencies like Bitcoin and Ethereum have seen improved order book depth, fragmented liquidity continues to pose challenges for institutional market participants.
“Crypto is evolving, but the industry must prioritize risk management, stress testing, and liquidity optimization to gain mainstream investor trust,” Kuehnel concluded.
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