Terra crashes no risk to wider crypto ecosystem, says Huobi Global CEO

Since the fall of Terra (LUNA) and TerraUSD (UST) could have a noticeable impact on the decision-making of both retail and institutional investors in the near term, it poses no risk to the larger crypto ecosystem, according to Huobi Global. CEO Du Jun.

In an interview with Cointelegraph, Jun explained that Terra’s collapse will affect the ecosystem by slowing investor interest in crypto as an asset class. Jun noted, however, that this will only be a short-term effect. In the long run, the exchange CEO explained that cryptos such as Bitcoin (BTC) demand as a hedge against fiat inflation will grow along with the advent of new uses for blockchain.

“In the long run, demand for cryptocurrencies as a hedge against fiat inflation will continue to grow, as will blockchain technology applications.”

When asked about critics using the Terra collapse as an opportunity to examine the entire crypto market, Jun emphasized that crashes like Terra occur in many other industries as well.

“Market crashes and coordinated attacks are not unique to crypto,” Jun said. Citing the Lehman Brothers collapse and the housing market crash, Jun said “every sector will see a fair number of players overthrown.” He went on to explain that the long-term survival of an industry always depends on the demand for its services.

“Crypto as a technology and asset class introduces value and innovation that is unique and irreplaceable, and we believe that one bad apple in the short term will not impact long-term demand for crypto assets and the industry as a whole.”

Jun is also optimistic and believes that when the price of BTC recovers, confidence in the market will return and this will lead to more investment in the space. Despite the bumps in the road, the CEO is confident that the broader crypto industry will continue to grow.

Related: US congressional research firm weighs in on UST crash, notes regulatory gaps

Jun also noted that flaws have been exposed by the Terra crash. “The bottom line is that stablecoins should be backed by less volatile tokens in the future,” he said. He underlined that collateral needs to be “rebalanced with less volatile tokens.”

Finally, the Huobi Global CEO said that in summary, “decentralized stablecoins are vital to the development of the entire cryptocurrency ecosystem.” He shared that the community can turn this loss into a victory by innovating so that tragic incidents like the Terra crash don’t happen again.

Earlier this month, the UST dollar crumbled when a whale began dumping UST. This cut the price of LUNA by 20% just one day after the first dump. The event even snowed when Terra founder Do Kwon shared plans for Terra’s recovery. Ultimately, the Terra debacle turned out to be one of the biggest price drops in crypto history.