- The primary telltale sign of vulnerable platforms is unusually high yields.
- Speculators should treat incentive schemes that reward holders for not selling with suspicion.
- The sector is also defined by the regular use of leverage, something which amplifies risk and exposes platforms to some very big comedowns.
- One other issue affecting crypto as a whole is that of contagion, with many platforms lending to and/or depositing with each other.
- The crypto industry needs to significantly improve its risk management practices, making them stricter and more systematic.
It’s every crypto investor’s worst nightmare, depositing money with a platform that later goes bust, making it all but impossible to recover funds. It’s also bad enough investing in the native token of any such platform, the collapse of which will send that token plummeting to Earth like a lead balloon.
This nightmare has already been realized on more than one occasion during the current bear market, with the collapses of Terra and Celsius leaving more than a few investors out of pocket. Yet while we can all point retroactively to how dangerous such platforms and their business models were, spotting the ‘next Celsius’ before it collapses is certainly a big ask.
However, a number of crypto industry players affirm that, at least in the worst cases, there are a few telltale signs that reveal some platforms are exposing…
