The crypto contagion sparked by this year’s infamous Terra implosion only spread to companies and protocols with “poor balance sheet management” and not the underlying blockchain technology, says Jonathon Miller, director General of Kraken Australia.
Speaking to Cointelegraph, the Australian crypto exchange head argued that sectors such as Ethereum-based decentralized finance (DeFi) have revealed their fundamental strength this year in weathering tough market conditions:
“Some of the contagion that we’ve seen through some of the lending models in space, [was in] this type of traditional crypto-based financial lending model. But what we haven’t seen is some sort of catastrophic failure of the underlying protocols. And I think that was recognized by a lot of people.
“Platforms like Ethereum didn’t fail when volatility hit. You’ve seen decentralized markets, decentralized lending models, DeFi in general, not fall. There was no contagion there. What you have seen is poor balance sheet management by closed rate lenders,” he added.
Miller’s comment comes despite CoinGecko reporting a 74.6% drop in market capitalization in DeFi during the second quarter of 2022 following the collapse of Terra and an increase in DeFi exploits. Although the crypto data aggregator also noted that the industry has managed to retain most of its daily active users.
Miller also added that blockchain projects only run into problems when the design of their underlying protocols is “obviously poor,” such as the case of Terra’s algorithmic stablecoin TerraClassic USD (USTC).
“I think it’s a compromise. There is a Treasury management issue, not a blockchain issue,” he said.
Asked about how Kraken weathered the crypto bear market this year, Miller suggested the company was well prepared to weather the volatility. He noted that the company has survived many slowdowns in its 11-year history, and notably didn’t spend a lot of money on marketing during last year’s bull run.
“We’re in a slightly different position because maybe some of the other exchanges that have been there spend a lot of money on advertising. We have a very strong word-of-mouth business model,” he explained.
Miller was also bullish on the current state of the Australian crypto sector, saying there are many “bullish underlying signals from companies that are still building products.”
He mentioned the big banks such as ANZ recently tested using its own stablecoin on Ethereum, and major payments giants such as Mastercard joining the Blockchain Australia Association, signaling a strong “intention to get involved in crypto and blockchain.”
“So, you know, the institutions using the underlying technology, maybe a little heat on some of the speculative features, which we’ve seen through 2022, which is potentially even a good thing.”