Bitcoin lenders are working to rebuild trust after previous sector failures like Celsius and BlockFi. These collapses mainly arose from poor risk management rather than flaws in the crypto-backed loan model itself. Current measures like overcollateralization and stricter liquidation thresholds, along with enhanced transparency and third-party custody, reduce counterparty risk. Even with strong term sheets promising no rehypothecation and lower loan-to-value ratios, sudden Bitcoin price fluctuations can still challenge lending stability. Moving forward, understanding and managing risks is crucial for the sector's recovery.
Bitcoin lenders are now focusing on tighter controls and risk management to regain trust, shifting from undercollateralized loans to more transparent and safer lending practices.
Despite the previous collapse of platforms like Celsius and BlockFi, the model for crypto-backed loans can still succeed with improved risk management and better transparency.
Platforms are implementing overcollateralization and stricter liquidation thresholds to mitigate risks, alongside ensuring better transparency in asset management.
The rise and fall of crypto lenders like Celsius and BlockFi highlighted the need for clear risk management practices and transparency to protect client investments.
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