Coinbase Blames Bankrupt Crypto Firms For Lack Of Risk Management Measures

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Cryptocurrency exchange Coinbase has suggested that companies that have recently filed for bankruptcy protection have failed to consider the basics of risk management.

The exchange said companies like Celsius, Three Arrows Capital (3AC), and Voyager Digital have been swept up in the crypto bull market and rolled out measures that have led to high-risk concentration, Coinbase said in a statement. blog post. published July 20.

“We believe these market participants have been caught up in the frenzy of a crypto bull market and have forgotten the basics of risk management. Unhedged bets, huge investments in the Terra ecosystem, and massive leverage provided and deployed by 3AC meant the risk was too high and too concentrated,” the exchange said.

Coinbase said the bankruptcy filing resulting from the recent crypto market crisis will likely leave a permanent mark on the industry. The market collapse was accelerated by factors such as regulatory pressure, high inflation and the crash of the Terra (LUNA) ecosystem.

Impact of Predicted Crypto Crash

Interestingly, Coinbase acknowledged that the business impact was predictable with a lack of risk control measures. For example, the exchange noted that some companies were over-leveraged with short-term liabilities.

Additionally, Coinbase argued that inadequate risk management measures could impede the inflow of capital into the crypto market, thereby preventing expansion.

“A healthy and well-functioning funding market is essential to the growth and sustainability of any economy. We believe well-designed risk management programs will help usher in new waves of capital and fuel the next expansion,” Coinbase added.

Coinbase’s reaction to the market crash

Notably, Coinbase is among the companies affected by the market meltdown that led to the restructuring of its operations. The exchange has since imposed a hiring freeze alongside laying off some of its staff.

In the blog post, the exchange assured users that it has taken the necessary steps to avoid going down the road to insolvency. Coinbase said some of its mitigation approaches involve conducting rigorous due diligence and being prepared for external surprises.

Overall, the cryptocurrency market has recently made minor gains, regaining the $1 trillion capitalization led by Bitcoin, which stabilized above the $20,000 level.

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