Cryptocurrency is the most Stable Thing Technology-wise: Changpeng Zhao CZ The crypto crash of 2022 was related to lending due to the DeFi staking which led to lending in the system which subsequently gave rise to debts
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The fall of cryptocurrency has been massive. The most trusted cryptocurrency, Bitcoin has witnessed a fall from grace as its prices dropped from $60,000 to a very low $20,000. The geo-political conflict between Ukraine and Russia is also having an effect on the crypto market.
Despite the problems that the cryptocurrency market is facing, Changpeng Zhao, CEO, Binance said that cryptocurrency is the most stable thing technology-wise in the turmoil situation.
Speaking at the Web Summit Lisbon, CZ said," Prices do fluctuate in the US Dollars or Fiat Currency but that is driven because of macroeconomic factors, the world is not stable. That is my view which is a bit of an extreme view."
CZ highlighted that there is volatility in investment and there is a need for investors to be educated about the volatile nature of investment and how they should manage risk. According to CZ, the crypto winter in 2014 and 2015 was based only around Bitcoin. However, the crypto winter in 2018 was different since the year was defined as the year of ICO (Initial Coin Offering) which is equivalent of an IPO wherein a company seeks to raise money to create a new coin, app or service. The 2018 crash witnessed the ICO take a significant dip. The 2022 crash is a bit different. CZ believes that the ecosystem has grown in terms of the introduction of GameFi, DeFi, metaverse, NFTs, etc.
He highlighted that the crypto crash of 2022 was related to the DeFi staking which led to lending in the system which subsequently gave rise to debts. Luna and TerraUSD went down for approximately $40 billion of market cap which started a cascading effect which caused Three Arrows to go illiquid.
"We see a cascading effect but each time it cascades it becomes smaller since the market cap of the other entities is much smaller. This time there is a lot of debt in the system but we are past the shock," commented CZ.
The decentralized nature of crypto has made it very transparent. The question that has popped up time and time again for cryptocurrencies is regulation. However, there are different regulations in different countries.
"The tricky part about regulations is that how do we protect consumers while encouraging innovation? If we only do one of those, it is very easy. If we want to do both of them, then we have to strike a good balance between the both so that is the tricky part. The smart regulators will encourage innovation and technology development while having certain rules to protect consumers," added CZ.-
