Only Firms With ‘Poor Balance Sheet Management' Were Affected by Contagion

The crypto epidemic only damaged firms that mismanaged their treasuries, but it didn’t harm the actual blockchain technology, according to one expert.

The crypto contagion sparked by Terra’s infamous collapse this year only impacted firms and protocols with “poor balance sheet management,” according to Kraken Australia’s managing director Jonathan Miller.

According to the CEO of an Australian crypto exchange, this year’s severe market circumstances have demonstrated the fundamental strength of Ethereum-based decentralized finance (DeFi) sectors like as “Some of the contagion that we saw across some of the lending models in the space… sitting on top of crypto. But what we didn’t see is a kind of catastrophic failure of the underlying protocols. And I think that’s been recognized by a lot people.”

“Ethereum didn’t fail when the price volatility hit. You saw decentralized markets, lending models, and DeFi in general remain stable. There was no spread there. What you saw was closed shop trade fee lenders with a poor balance sheet who caused the collapse.”

Despite the fact that CoinGecko found a 74.6 percent market capital decrease in DeFi during Q2 2022 following the collapse of Terra and an increase in DeFi exploits, Miller’s remark suggests otherwise. Despite this, however, the industry was able to retain most of its daily active users, according to the crypto data aggregator.

Blockchain initiatives, on the other hand, ran into difficulties when their underlying protocols’ designs were “obviously poor,” such as the case of Terra’s algorithmic stablecoin TerraUSD Classic (USTC).

Miller was asked if Kraken handled the crypto bear market well this year. He remarked that while the firm has previously endured many downturns, it has not blown a significant amount of money on marketing throughout its 11-year history.

Miller was positive about the Australian crypto market’s current condition, claiming that there are “a lot of bullish underlying signals from firms who are still developing products.”

“They’re serious and they mean business,” Mr. Woodford said of Australian banks, adding that big players such as ANZ have lately tested out the usage of their own stablecoin on Ethereum and significant payments companies like Mastercard have joined the Blockchain Australia Association to show a strong “intent to get involved in crypto and blockchain.”

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