Terra crash not a risk to the broader crypto ecosystem, says Huobi Global CEO

As the autumn of Terra (LUNA) and TerraUSD (UST) could have a noticeable short-term impression on the decision-making of each retail and institutional traders, it doesn’t pose a threat to the bigger crypto ecosystem, in response to Du Jun, CEO of Huobi World CEO. 

In an interview with Cointelegraph, Jun defined that the collapse of Terra will have an effect on the ecosystem by slowing down investor curiosity in crypto as an asset class. Nevertheless, Jun famous that this can solely be a short-term impact. In the long run, the alternate CEO defined that crypto like Bitcoin’s (BTC) demand as a hedge in opposition to fiat inflation will develop together with the appearance of recent functions for blockchain:

“In the long run, demand for cryptocurrencies as a hedge in opposition to fiat inflation will proceed to develop, in addition to for functions of blockchain know-how.”

When requested about critics who’re utilizing the Terra collapse as a possibility to take a dig on the complete crypto market, Jun highlighted that crashes like Terra additionally occur in lots of different industries.

“Market crashes and coordinated assaults should not distinctive to crypto,” mentioned Jun. Citing the Lehman Brothers collapse and the housing market crash, Jun talked about that “each business will see its justifiable share of toppled gamers.” He additional defined that the long-term endurance of an business all the time will depend on the demand for its providers:

“Crypto as a know-how and asset class introduces worth and innovation which might be distinctive and irreplaceable, and we consider that one unhealthy apple within the quick run is not going to have an effect on long-term demand for crypto belongings and the business as an entire.”

Jun can be optimistic and believes that when the worth of BTC recovers, confidence available in the market will return and it’ll result in extra investments coming into the area. Regardless of the bumps within the highway, the CEO trusts that the broader crypto business will develop constantly.

Associated: US congress analysis company weighs in on UST crash, notes gaps in regulation

Additionally, Jun famous that there are flaws uncovered by the Terra crash. “The takeaway is that sooner or later, stablecoins needs to be backed by much less risky tokens,” he mentioned. He underscored that collateral have to be “rebalanced with much less risky tokens.”

Lastly, the Huobi World CEO mentioned that in abstract that “decentralized stablecoins are very important to the event of your entire cryptocurrency ecosystem.” He shared that the neighborhood can flip this loss right into a win by innovating in order that tragic incidents just like the Terra crash don’t repeat.

Earlier this month, the UST greenback peg crumbled as a whale began to dump UST. This lowered LUNA’s worth by 20% solely at some point after the preliminary dump. The occasion then snowballed at the same time as Terra founder Do Kwon shared plans for Terra’s restoration. Ultimately, the Terra debacle turned one of many largest worth meltdowns within the historical past of crypto.