The collapse of FTX sent shockwaves across the crypto space and triggered the demise of some crypto firms, and prices plummeted along with it. However, the market is recovering and confidence is returning.

Bitcoinist spoke to Bitrue’s Chief Strategy Officer, Robert Quartly-Janeiro, and he shared his thoughts on how the crypto exchange has fared after the FTX decline and how Bitrue is working to regain user trust afterwards.

Bitcoinist: Can you give us your thoughts on the whole FTX debacle? Do you think that was avoidable?

Robert Quartly-Janeiro: Ironically, not long ago I read the inside story in the Financial Times about the last few days at FTX. It’s a somber read, even though Ryne Miller is a consummate professional. FTX operated way outside of its remit and if you’re into embezzling money like they did with Alameda trading, then you’re going to get a hit at some point.

Could it have been avoided? Yes, of course it could – and should have – by not doing it in the first place. I feel for the FTX users and their losses, but also for the majority of the staff who obviously had no idea what was going on and the impact it would have on their careers and money.

Q: How have the stock markets fared in this time since FTX went bankrupt?

A: Over the past several months, we have seen companies closely associated with FTX falter, leading to repercussions on the crypto price and negative media coverage. For a while there was a lot of speculation about who will be next? As another top exchange plummeted, as its trading volume fell and the cost of debt rose, comments were made. However, over time, things calmed down. Binance’s deal for SEBC (Sakura Exchange Bitcoin) arguably played a big role here as it showed that big deals are still being made and FTX’s problems remain FTX’s.

While the market has recovered, many exchanges continue to operate cautiously, risk-free, and more frugally. I expect consolidation to continue due to economies of scale, confidence and market moves.

Q: Currently, crypto exchange users are understandably wary of keeping their funds on CEX. Is there any way exchanges can regain that trust and what exactly is Bitrue doing to regain user trust?

A: The caution is understandable. It is incumbent on all CEXs to be strong custodians of funds if they want to be taken seriously or they would lose that part of the market – in the sense that it’s a matter of choice. Investors need to distinguish between crypto exposure moving in value and fluctuations in fiat real-time FX prices, which makes stop-loss trades important. Much has been said about Proof of Reserves (PoR), but I think accurate leverage ratios would be more valuable. As a business, CEXs with significant volume, customer base, and revenue must set the tone.

Although forthcoming regulations in various countries will protect investors’ wealth in a way not dissimilar to banking or wealth management, it must be financially viable. For example, registration would cost millions in some countries, which is not good as registered exchanges have higher costs and trading fees. That creates a different problem as the pandemic has made us more flexible in terms of where we can live, work and trade. Likewise, it would be interesting to see how people would store their crypto assets when central bank crypto wallets are created.

Total market cap crosses $1.1 trillion | Source: Crypto Total Market Cap on TradingView.com

At Bitrue, we do several things to regain user trust. Firstly, in 2020 we established an insurance fund with mainly XRP and BTR denominated tokens to protect users’ assets in case of a security breach. (See this for more details Article.) Secondly, we continuously conduct penetration tests to ensure the security of the wallet. Third, Bitrue has capped the amount of leverage investors can use. And fourthly, a PoR audit is carried out by external auditors. In addition, it is important to build more infrastructure, ensure high standards and maintain open communication and transparency.

Q: Do you see user confidence back to what it was before the FTX decline anytime soon?

A: Exchanges have already partially regained confidence. FTX’s fallout was contained and did not affect organizations other than those heavily associated with it. Yes, many people are financially burned for reasons outside of the market — that’s not okay — but many crypto investors use more than one exchange.

With renewed confidence in the global economy, both the stock and crypto markets are rising, and trading volumes and amounts of money invested in the exchanges are also increasing.

Stepping back, FTX was an exchange led by what I read from about a dozen people who knew what was going on. In the past year, 25 to 30 other exchanges have been shut down, but 250 “recognized” exchanges of varying sizes and quality remain, which is a lot.

You see, CEXs need to manage financial risks and market movements appropriately. As the old saying goes, “don’t put all your eggs in one basket.” FTX-Gemini has highlighted the need for better risk management, stricter maintenance of margins (margin calls) and greater visibility into the correlation of market movements, companies and exposure: all these aspects that financial markets have not properly resolved before, during or since 1637 Let that sink in.