Kraken Australia CEO: "The liquidity crisis has affected firms with "poor balance sheet management"
According to the managing director of Kraken AustraliaJonathon Miller, the cascade of liquidations caused by the infamous Terra crash this year affected only companies and protocols with "poor balance management", and not the underlying blockchain technology.
"The chain reaction that we have seen in some lending models in the sector [has been] in this traditional financial lending model lying on top of cryptocurrency. But what we didn't see was a catastrophic failure of the basic protocols. And I think a lot of people have recognized that."
"Platforms like Ethereum did not fail when volatility arose. You have seen how decentralized markets, decentralized lending models, DeFi as a whole have not collapsed. There was no infection. What you saw was poor balance sheet management by the creditors who closed the shop with a commission for trading," he added.
Miller's comment came despite the fact that CoinGecko reported a 74.6% decrease in DeFi's market capitalization in the second quarter of 2022 after the collapse of Terra and the growth of DeFi exploits. Although the cryptocurrency data aggregator also noted that the industry managed to retain most of its daily active users.
Miller also added that blockchain projects faced problems only when the design of their underlying protocols was "obviously bad", as in the case of the algorithmic stable coin TerraUSD Classic (USTC).
"I think it's a compromise. This is a treasury management problem, not a blockchain problem," he said.
When asked how Kraken has handled the bear market of cryptocurrencies this year, Miller suggested that the company is well prepared to deal with volatility. He noted that during its 11-year history, the company has experienced many downturns and, in particular, did not spend a lot of money on marketing during the bullish growth last year.
"We are in a slightly different position than perhaps some other exchanges that spend a lot of money on advertising. We have a really strong business model and reputation," he explained.
Miller was also upbeat about the current state of the Australian crypto sector, saying there are many "bullish underlying signals from companies that are still building products."
He pointed to major banks such as ANZ, which have recently tested the use of their own stable coin on Ethereum, and major payment giants such as Mastercard, who have joined the Blockchain Australia Association, which indicates a firm "intention to participate in cryptocurrency and blockchain."
https://coin-signal.com/cryptonews/kraken-australia-ceo-the-liquidity-crisis-has-affected-firms-with-poor-balance-sheet-management/
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