It is a fact that the demise of Terra (LUNA) and TerraUSD (UST) had a major effect on the crypto industry in general. Both private and institutional crypto investors have been hit pretty hard in the short term as Terra’s total collapse. The question at the moment is whether there will also be long-term adverse effects on the overarching crypto ecosystem.
Short-term consequences of the LUNA crash
Co-founder of major crypto exchange Huobi, Jun Du, spoke in a interview with Cointelegraph about the possible effects of the Terra chapter on the crypto industry in the future. According to him, these effects can be clearly distinguished into short-term and long-term effects.
In the short term, the consequences will be felt for every crypto investor. He states that the collapse of the Terra network has reduced interest in other crypto projects. This effect will remain noticeable in the near future. This is of course not very surprising, since Terra was one of the largest crypto projects and went down in the blink of an eye.
In the long term, however, Terra’s downfall will often end up in obscurity, Du says. According to him, crashes like we saw with Terra have occurred in other industries as well. Take, for example, a number of large banks during the credit crisis. In the short term this had disastrous consequences, but in the long term the effects are a lot less serious.
“In the long run, demand for cryptocurrencies as a hedge against fiat inflation will continue to grow, as will blockchain technology applications.”
Also, fundamentally nothing has changed about cryptocurrencies such as bitcoin (BTC) and ethereum (ETH)† Du states that bitcoin is still an excellent way to protect you as an investor against inflation. In addition, the number of use cases of blockchain technology is still continuing at a rapid pace. In the long term, the Terra crash will therefore be little more than a dark chapter, according to Du.