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

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

In an interview with Cointelegraph, Jun explained that the collapse of Terra will hurt the ecosystem by dampening investor interest in crypto as an asset class. However, Jun noted that this will only be a short-term effect. Longer term, the exchange CEO explained that demand for crypto like Bitcoin (BTC) as a hedge against fiat inflation will grow as new applications for blockchain emerge:

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

When asked about critics citing Terra’s collapse as an opportunity to attack the entire crypto market, Jun stressed that crashes like Terra occur in many other industries.

“Market crashes and coordinated attacks aren’t just limited to crypto,” Jun said. Citing the collapse of Lehman Brothers and the housing market crash, Jun mentioned that “every industry will see its fair share of players toppled.” He further explained that the long-term viability 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 a single bad apple will not hurt long-term demand for crypto assets and the industry at large in the short term.”

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

Related: The US Congressional Research Agency assesses the UST crash and identifies regulatory gaps

Also, Jun noted that there are bugs exposed by the Terra crash. “The takeaway is that going forward, stablecoins should be backed by less volatile tokens,” he said. He emphasized that collateral “needs to be rebalanced with less volatile tokens.”

In conclusion, the CEO of Huobi Global said that “decentralized stablecoins are vital to the development of the entire cryptocurrency ecosystem.” He shared that the community can turn this loss into a gain through innovation so that tragic incidents like the Terra crash don’t happen again.

Earlier this month, the UST dollar peg crumbled when a whale began jettisoning UST. This dropped LUNA’s price by 20% just a day after the first dump. The event then even snowballed when Terra founder Do Kwon shared plans for Terra’s restoration. In the end, the Terra debacle turned into one of the largest price meltdowns in crypto history.