Earlier this month, the Terra network crash resulted in an intense sell-off in the crypto market. Analysts estimate that the crypto market cap dipped by nearly $500B following the crash. All digital assets are still well off their ATHs. The Leading digital asset, BTC, continues to trade at sub-$30K levels.
After the network crash, the community abandoned its native token and stablecoin. Hence, neither of them has any real value again. However, there is still no relief for the market as the US Fed reserve announced that it would soon increase interest rates. The fed claims that its reason for hiking interest rates is to curb growing inflation rates.
Don’t Abandon The Crypto Industry – IMF Chair
However, Kristalina Georgieva (IMF chair) opines that investors shouldn’t use the Terra crash as a basis to abandon the crypto industry. The IMF chair made her opinion known while delivering her speech at the world economic summit in Davos.
Georgieva stated that cryptos are a key part of the world financial system. They enable cheaper transaction fees, and the transactions are completed speedily.
The Terra network crash came as a shock to many. However, Paolo Ardoino, Tether CTO, explained that the design of the network’s stablecoin was a disaster waiting to happen.
As an algorithmic stablecoin, the TerraUSD (UST) maintains its USD peg differently from other stablecoins such as the USDT and USDC. The design of the USDC and the USDT ensures that they are always pegged to the USD in a 1:1.
These stablecoins always be in 1:1 with the USD regardless of what’s happening in the crypto market. However, the TerraUSD maintains its USD peg through various algorithms.
Cryptos Differ From One Another – Kristalina Georgieva
During her speech, Georgieva explained that cryptos differ from one another. She said, “I urge you not to abandon this emerging industry. “Once we can separate the apples from bananas and oranges, we will continue to enjoy the cheaper fees and fast service this technology offers.”
Many anti-crypto advocates have used the recent market downtrend to criticize it further. But the IMF chief explained that there are various risk levels associated with any investment. Hence, investors must always determine the risk levels before making their investment.
For instance, they need to be extra-cautious about investing in less backed assets. Georgieva further said, “if any asset has less backing, you must prepare your mind that your investment can multiply or disappear.”
Regulation And Education Are Necessary For The Crypto Industry – Georgieva
The IMF chair urged important crypto industry participants to keep pushing to regulate the industry. She opined that regulating the industry would better protect investors.
Then, she added that authorities could better protect investors once they prioritize crypto regulation and education. Whether cryptos are a currency has been a source of huge debate.
However, Georgieva explained a clear difference between crypto products and currencies. “A crypto product with no sovereign guarantee is not a currency. But we can regard it as an asset class.”
When speaking about cryptos in a recent interview, ECB President, Christine Lagarde, reiterated that cryptos have no value. Hence, authorities must regulate it properly. She also said that crypto price movements are only based on speculations. They have zero intrinsic value.