Depositors are not actually trading themselves, so the only way failure modes I can see is if the exchange takes the money and runs, if there is a catastrophic failure of the trading engine, or if they get hacked.
There is risk that is baked in from the fact that depositors are on the hook if trades can not be unwound quickly enough, and because this is Bitcoins, where volatility is crazy there is even more of this risk.
For example assume you lend money for some trader to go long, and now say that suddenly prices drop so quickly that it puts the trader beyond a margin call, in fact it puts him at liquidation, oh uh...the traders margin wallet is now depleted, who makes up the balance, the lenders. They actually do mention this on their website. But they don’t tell you what the margin call policy is. This is a really important part of the risk. If they allow a trader to only put up $50 of a $100 position and call you in when your portion hits 25% that would be normal for something like index equities but pretty insane for something like Bitcoin.
There is risk that is baked in from the fact that depositors are on the hook if trades can not be unwound quickly enough, and because this is Bitcoins, where volatility is crazy there is even more of this risk.
For example assume you lend money for some trader to go long, and now say that suddenly prices drop so quickly that it puts the trader beyond a margin call, in fact it puts him at liquidation, oh uh...the traders margin wallet is now depleted, who makes up the balance, the lenders. They actually do mention this on their website. But they don’t tell you what the margin call policy is. This is a really important part of the risk. If they allow a trader to only put up $50 of a $100 position and call you in when your portion hits 25% that would be normal for something like index equities but pretty insane for something like Bitcoin.