Risk Insights
The risk level for CEXs has slightly deteriorated following the record liquidations on October 10. Major exchanges remain at a reasonable PD range. We expect risk levels to stabilize as market sentimentreturns to baseline, though softer trading conditions could prove hard to overcome.
Prior to the liquidations, risk had been improving on the back of record prices for Bitcoin, combined with surges across other major coins. The accompanying improvement in trading volumes helped to lift exchange risk from a lackluster August, putting the market in a more resilient position by early October.
Risk Snapshot
Agio Ratings calculates the one-year probability of default (PD) for multiple exchanges and custodians. These are the PDs for a sample of firms as of the last day of the month. PDs marked in green have improved; those in red deteriorated.
Navigating Crypto-Related Risks for Banks
In recent discussions with regulators, we've covered how banks are addressing the crypto market's unique vulnerabilities. This presentation delves into how common risk mitigants such as narrowing exposure and over-collateralization help but don’t eliminate emerging risks. We also raise several important questions on depositor protection and insolvency in stablecoins.
Read Navigating Crypto-Related Risks for Banks >
Risk News Roundup
Binance Launches $400M Recovery Fund to Aid Users Hit By Market Crash (Yahoo Finance)
Tether Reveals USAT Stablecoin, Appoints Former White House Advisor to Lead Business (CNBC)
Paxos Fat-Fingers $300 Trillion of Paypal Stablecoin (Coindesk)