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The crash of the LUNA crypto and UST stablecoin is likely to negatively impact retail and institutional demand for crypto assets in the short term. However, a crypto exchange executive believes that the recent collapse of the Terra ecosystem doesn’t pose a risk to the larger crypto ecosystem.
Du Jun, CEO of crypto exchange Huobi Global, explained that Terra’s collapse would likely slow down investor interest in crypto as an asset class. However, Jun believes that this slowdown will only be short-term and that demand for cryptos such as Bitcoin (BTC) as a hedge against inflation will soon pick up.
“In the long term, demand for cryptocurrencies as a hedge against fiat inflation will continue to grow, as well as for applications of blockchain technology,” Du Jun told Cointelegraph in an interview.
Commenting on Terra’s recent collapse, the Huobi CEO pointed out that crashes have also happened to other industries, citing the housing market crash and the collapse of the Lehman Brothers.”Market crashes and coordinated attacks are not unique to crypto,” Jun explained, adding that “every industry will see its fair share of toppled players.”
However, he argued that demand for its services will always ensure the crypto industry’s longevity. “Crypto as a technology and asset class introduces value and innovation that are unique and irreplaceable, and we believe that one bad apple in the short run will not affect the long-term demand for crypto assets and the industry as a whole,” Jun said.
While Terra’s collapse was indeed disastrous for its investors, the incident exposed flaws in the system. The industry can turn this into a win by taking steps to make sure similar incidents do not happen in the future. For instance, Jun said that collaterals for stablecoins should be rebalanced with less volatile tokens.
“The takeaway is that in the future, stablecoins should be backed by less volatile tokens,” he said. Despite UST’s crash, Jun believes that privately issued stablecoins are not going away anytime soon as “decentralized stablecoins are vital to the development of the entire cryptocurrency ecosystem.”
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