Contagion only hits companies with ‘poor balance sheet management’ – Kraken Aus boss

Kraken Australia’s managing director Jonathon Miller said the crypto contagion sparked by Terra’s infamous implosion this year would only spread to companies and protocols with “mismanaged balance sheets”, not the underlying blocks chain technology.

In an interview with Cointelegraph, the head of the Australian cryptocurrency exchange believes that sectors such as Ethereum-based decentralized finance (DeFi) have demonstrated their fundamental strength this year by weathering tough market conditions:

“We’ve seen some contagion in some lending patterns in the space, [was in] This cryptocurrency-based traditional financial lending model. But what we don’t see is a catastrophic failure of the underlying protocol. I think a lot of people agree with that. “

“Platforms like Ethereum didn’t fail when volatility hit. You saw decentralized marketplaces, decentralized lending models, DeFi in general didn’t go down. There was no contagion there. You see It was the balance sheet mismanagement of the closed store transaction fee lender,” he added.

Miller’s comments came despite CoinGecko’s report that DeFi’s market cap fell 74.6% in Q2 2022 following the Terra debacle and an increase in DeFi exploits. Although the encrypted data aggregator also noted that the industry managed to retain most of its daily active users.

Miller also added that blockchain projects only run into problems when their underlying protocols are “obviously poorly designed,” such as Terra’s algorithmic stablecoin TerraClassic USD (USTC).

“I think it’s a trade-off. There’s a money management issue, not a blockchain issue,” he said.

When asked about Kraken’s performance in a crypto bear market this year, Miller said the company is well-positioned for volatility. He noted that the company has experienced multiple downturns in its 11-year history, especially during last year’s bull market and didn’t spend a lot on marketing.

“We’re in a slightly different situation, maybe some other exchanges that are already spending a lot of money on advertising. We have a very strong word-of-mouth business model,” he explained.

related: Crypto contagion deters investors in the short term, but fundamentals remain strong

Miller was also optimistic about the current state of the Australian crypto industry, saying that there are many “bullish underlying signals from businesses still building products.”

He noted that major banks such as ANZ recently tested the use of their own stablecoins on Ethereum, and major payments giants such as Mastercard joined the Australian Blockchain Association as signs of “interest in participating in cryptocurrencies and blockchain.”

“So you know, some heat for institutions to leverage the underlying technology, maybe some speculative features, we’re seeing that in 2022, and that might even be a good thing.”