'Bridging CeFi and DeFi: Better Risk Management and More Sustainable Wealth Generation' by midastrevor cedefi investment
, Celsius, Voyager Digital, Vauld — this is not even an exhaustive list of crypto-institutional CeFi funds that filed for bankruptcy.
However, there are significant downsides of retail crypto-banking, e.g. a limited return on investments and scalability. While the cryptocurrency adoption rates are indeed skyrocketing, they are drastically lagging behind those of traditional finance. Hence, there is a low-profit ceiling for CeFi entities and a strong incentive to switch to riskier alternatives.
Yet, this doesn’t mean risk management is more accessible in DeFi. Taming complicated derivatives and techniques require time and expertise, and plenty of technology-specific risks exist. For example, protocol vulnerabilities sometimes elude even the most pedantic technical audit, which is why you often hear of DeFi hacks and exploits. At the same time, the economic incentives can also be miscalculated, which results in unpredictable and dangerous behavior of users.